NZD/USD retraces from daily highs to 0.6800 ahead of the Fed

• The NZD/USD advances some 0.52% ahead of the Fed in the day.
• An upbeat market mood keeps the pair in the bid, though downside risks remain.
• The Fed is expected to raise rates by 25 bps.

The New Zealand dollar jumps from daily lows and so far is gaining some 0.53%, amid a positive market mood, ahead of the FOMC monetary policy decision. At press time, the NZD/USD is trading at 0.6810.

Upbeat market mood courtesy  of improved discussions between Russia-Ukraine

Market sentiment remains positive, reflected by US equities trading in the green, meanwhile, European bourses closed with gains. Safe-haven peers depreciate in the FX space, benefiting the risk-sensitive currencies, like the NZD and the AUD.

Russia-Ukraine jitters keep grabbing the headlines throughout the day. However, of late, as the Federal Reserve decision looms, market players’ focus is on the US central bank. Analysts expect the Fed to hike rates by 0.25% for the first time in three years. While money market futures have already priced in an 87% chance of that, the focus would be on balance sheet reduction and the Summary of Economic Projections (SEP), with its dot-plot that reflects interest rates expectations of the board. Noteworthy, what the board projects on inflation and the US economic outlook.

Around 18:30 GMT, Fed’s Chief Jerome Powell would hold its press conference. He would be asked about the war in Ukraine, which injected plenty of volatility into the financial markets and its impact in the domestic and global economies.

Late on the day, the New Zealand economic docket would release GDP figures for Q1, with a gain of 3.2% YoY expected.

Technical levels to watch