NZD/USD weakens on Fed’s hawkish stance on rates trajectory, plunges to near 0.6080

• NZD/USD extends its losses as market sentiment changed after the Fed’s hawkish remarks.
• Traders await US employment data to gain further cues on the US economic scenario.
• The better-than-expected Chinese Manufacturing PMI failed to support the NZD.

NZD/USD continues to move in a downward direction for the second straight session on European trading hours on Thursday. The NZD/USD pair drops to near 0.6080, at the time of writing. The market bias has turned towards the US Dollar (USD) as Federal Reserve (Fed) Chairman Jerome Powell ruled out any possibility of an interest rate cut in a March meeting.

Powell underscored the enduring presence of heightened inflation and emphasized the strong growth in economic activity. To gain further impetus on an economic scenario in the United States (US), traders would likely observe Thursday’s release of key events, including US Initial Jobless Claims, Nonfarm Productivity, and ISM Manufacturing PMI.

Furthermore, the Federal Open Market Committee (FOMC) does not anticipate considering a reduction in the target range until it has acquired increased confidence that inflation is progressing consistently toward the 2.0 percent target. Although inflation has moderated over the past year, it is still elevated. The statement omits the reference to additional policy firming.

The New Zealand Dollar (NZD) refused to cheer better-than-expected Chinese factory data, consequently, limiting the losses of the NZD/USD pair. Caixin Manufacturing PMI for January remained consistent at 50.8 against the expected 50.6 reading.

Additionally, the Reserve Bank of New Zealand (RBNZ) emphasizes a target of around the 2% midpoint for future inflation. As inflation trends downward, financial markets anticipate an earlier rather than later reduction in the Official Cash Rate (OCR), with three rate cuts already factored into expectations for this year.