NZD/USD hovers around 0.6100 as US Treasury yields decline, awaits New Zealand CPI data

• NZD/USD retraces its recent losses on weaker US Dollar.
• The downbeat US bond yields weaken the Greenback.
• Kiwi Business NZ PSI came in at 48.8 in December 51.2 prior.

NZD/USD recovers its recent losses and trades around 0.6100 during the early European session on Tuesday. The NZD/USD pair receives upward support as the US Dollar (USD) declines on downbeat United States (US) Treasury yields.

The US Dollar Index (DXY) inches lower to near 103.10 with the 2-year and 10-year yields on US bond coupons standing at 4.39% and 4.11%, respectively, at the time of writing. The market sentiment reflects the expectation that the Federal Reserve (Fed) will cut interest rates more than any other major central bank in 2024. However, recent hawkish remarks from Fed members indicate a shift in the Fed's stance towards a more hawkish trajectory for interest rates.

Investors seek refuge in the safe-haven US Dollar due to the geopolitical uncertainty and potential disruption to maritime trade routes in the Red Sea region. Iran-backed Houthi rebels intensify their attacks on maritime ships. In addition, US officials have confirmed a new round of military action, including air strikes, against Houthi terrorist targets in Yemen.

The latest data from Business NZ, released on Tuesday, indicates that New Zealand's Business NZ Performance of Services Index (PSI) for December was recorded at 48.8, down from 51.2 in November. Furthermore, concerns about China's growth momentum persist, driven by factors such as a property crisis, and sluggish consumer and business confidence. These concerns are contributing to downward pressure on the New Zealand Dollar (NZD), which in turn, undermines the NZD/USD pair.

The release of the Richmond Fed Manufacturing Index for January, scheduled for later in the North American session, will offer additional insights into the current state of the US economy. On Wednesday, attention will turn to New Zealand's Consumer Price Index (CPI) data for the fourth quarter.