NZD/USD gains ground on expected Chinese stimulus, extends gains to near 0.6140

• NZD/USD moves in an upward direction amid a subdued US Dollar.
• The improved US balance sheet gives rise to US bond prices, undermining the US Dollar.
• The expected Chinese stimulus could boost the New Zealand Dollar.

NZD/USD inches higher for another session, trading around 0.6140 during the early European hours on Tuesday. The US Dollar (USD) has faced a challenge on downbeat US Treasury yields. The release of an improved US balance sheet has supported US Treasury bond prices, which, in turn, puts downward pressure on the Greenback.

The US Dollar Index (DXY) holds ground around 103.50 with the 2-year and 10-year yields on US Treasury notes standing lower at 4.29% and 4.03%, respectively, by the press time. Moreover, there is a prevailing market risk spurs on escalated tension in the Middle East.

Tuesday's releases of the Housing Price Index and Consumer Confidence figures will be under scrutiny by market observers, aiming to glean additional insights into the US economic landscape.

The prevailing expectation among most economists is for the first rate cut to occur in May or June, though the possibility of a cut at the Federal Reserve's March meeting is not ruled out. Meanwhile, the anticipated Federal Open Market Committee (FOMC) statement on Wednesday, January 31 is expected to yield no adjustment.

The New Zealand Dollar (NZD) seems to have received a boost with the People's Bank of China (PBoC) considering a possible reduction in the Medium-term Lending Facility (MLF) rate. Meanwhile, Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway remarked on Tuesday that recent economic data indicates the effectiveness of monetary policy, but there remains a journey ahead before inflation reaches its target midpoint of 2.0%.