NZD/USD treads water around 0.5930, US bond yields hits its highest since 2007

• NZD/USD consolidates despite advanced US Treasury yields.
• Traders' attention is expected to be on the US Home Sales data.
• MPR indicated a probability of 40% for a 25 bps hike in 2024.

NZD/USD hovers around 0.5930 during the early hours of the Asian session on Monday, treading water to extend the gains registered in the previous trading session. The pair could face downward pressure, which could be attributed to the advanced United States (US) government bond yields. The 10-year Treasury yields hits its highest since 2007, which could contribute to strengthening the Greenback.

Kiwibank’s analysts said in a note that Official Cash Rate (OCR) track was more hawkish than expected. The RBNZ aims to ensure that the recent tightening measures have a significant impact on households in the upcoming months. Any considerations of reducing interest rates were intentionally suppressed to maintain elevated wholesale rates and to keep mortgage and other lending rates high.

Additionally, the monetary policy review (MPR) stated that the Reserve Bank of New Zealand (RBNZ) maintains its projection for the official cash rate (OCR) to stay at 5.5%. The MPR also indicated a probability of 40% for an additional 25 basis point (bps) increase in 2024. This potential development could exert an influence on the NZD/USD pair.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, trades hovers around 103.30. The US Dollar (USD) could be supported by the expectations that the Federal Reserve (Fed) will stick to its hawkish stance due to upbeat US macroeconomic data.

Market participants will closely watch the upcoming US Existing Home Sales Change (MoM) later in the North American session. Later in the week, the focus will also be on Fed Chair Jerome Powell's speech during the Jackson Hole to get fresh insights into the overall US economic outlook and inflation situation.