NZD/USD stretches lower to near 0.6110, awaits New Zealand's CPI data on Wednesday

• NZD/USD continues to lose ground as the US Dollar recovers intraday losses.
• The improved risk appetite weighs on the Greenback.
• New Zealand Dollar faces challenges due to the decline in the domestic manufacturing sector.

NZD/USD trims its intraday gains, continuing the losing streak for the second successive session on Monday. The NZD/USD pair trades near 0.6110 during the Asian session. However, the US Dollar (USD) receives a modest downward pressure due to the improved risk appetite.

As FOMC (Federal Open Market Committee) committee members enter the blackout period ahead of the January meeting, the Greenback faces downward pressure despite hawkish comments from Federal Reserve (Fed) members. The market sentiment appears to be influenced by the expectation that the Fed may cut interest rates more than other major central banks in 2024, which could exert selling pressure on the US Dollar.

San Francisco Fed President Mary Daly's acknowledgment of substantial work ahead in bringing inflation back to the 2.0% target reflects a cautious stance. Furthermore, Atlanta Fed President Raphael Bostic has highlighted his openness to adjusting his outlook on the timing of rate cuts, emphasizing the US Fed's commitment to a data-dependent approach.

Furthermore, the upbeat US Consumer Sentiment Index likely played a role in constraining the losses of the US Dollar. The preliminary Index rose to 78.8 in January from 69.7 prior, exceeding the market consensus of 70 reading. US Existing Home Sales Change (MoM) declined by 1.0% against the previous growth of 0.8%.

On the New Zealand front, the Business NZ Performance of Manufacturing Index (PMI) reported a contraction on Friday. The index decreased to 43.1, down from the previous figure of 46.5. This suggests potential challenges in New Zealand’s manufacturing sector. Looking ahead, market participants will closely watch the upcoming Kiwi’s Consumer Price Index (CPI) data scheduled for Wednesday. Expectations are for a reduction in the fourth quarter.