NZD/USD extends its downside below 0.5950 amid USD demand, focus on US data

• NZD/USD remains under selling pressure amid a rally of the US Dollar.
• The hawkish stance from the Federal Reserve (Fed) boosts the USD against the New Zealand Dollar (NZD).
• The US Core Personal Consumption Expenditure (PCE) Price Index data will be a closely watched event this week.

The NZD/USD pair trades in negative territory for two straight days during the Asian session on Wednesday. The uptick in the pair is bolstered by the stronger US Dollar (USD) and risk aversion. The pair currently trades near 0.5932, down 0.20% for the day.

Tuesday's economic data revealed that US Conference Board (CB) Consumer Confidence rose to 103.0 in September from 108.7 in August. The figures reached their lowest level in four months, reflecting the impact of rising interest rates and political uncertainty. In August, Building Permits came in at 1.541M from the previous month's figure of 1.44M. The House Price Index for July increased to 0.8% MoM from 0.4% in the prior reading, exceeding the consensus estimate of 0.5%. August New Home Sales decreased -8.7% from July's rise of 8%.

The Federal Reserve (Fed) decided to hold interest rate unchanged in the 5.25% to 5.50% range in its September meeting last week. In terms of macroeconomic predictions, most members still expect further rate rises later this year. Minneapolis Federal Reserve Bank President, Neel Kashkari stated on Tuesday that he is one of the Fed policymakers who sees one more rate hike this year. He added that US rates probably have to go a little bit higher and be held there for longer, to cool things off. The hawkish stance from the Federal Reserve (Fed) boosts the USD against the New Zealand Dollar (NZD) and acts as a headwind for the NZD/USD pair.

On the Kiwi front, the markets appear to have priced in an Official Cash Rate (OCR) rate hike by the Reserve Bank of New Zealand (RBNZ) through the end of 2023 as the New Zealand economy indicates to be more resilient than initially expected. About the data last week, New Zealand’s Trade Balance (NZD) dropped to $-2,291M MoM in August versus $-1,107M prior. The annual trade deficit improved to $15.54B for the said month versus $-15.88B prior figures.

Looking ahead, New Zealand’s Business Confidence for September and ANZ Roy Morgan Consumer Confidence will be due on Thursday and Friday, respectively. On the US docket, the US Durable Goods Orders report will be released on Wednesday. The focus will shift to the Fed's preferred measure of consumer inflation, the Core Personal Consumption Expenditure (PCE) Price Index, scheduled for release on Friday. It is anticipated that the annual rate will decline from 4.2% to 3.9%. Traders will take cues from the data to find AUD/USD trading opportunities.