NZD/USD prints fresh day’s low around 0.6870 amid a sell-off in risk-sensitive assets

• NZD/USD skids near 0.6870 as DXY strengthens on rising odds of 50 bps rate hike in May by the Fed.
• Risk-off impulse has diminished the demand for risk-perceived assets, kiwi bulls lose their grip.
• This week investors will focus on Powell’s speech and NATO meet.

The NZD/USD pair has slipped below Monday’s low at 0.6873 as risk-sensitive assets lose appeal on souring market mood. The kiwi bulls have been hammered ahead of the Federal Reserve (Fed)’s Chair Jerome Powell's speech, which is due on Wednesday.

The speech from the Fed’s Powell is likely to dictate the roadmap of six interest rate hikes to curtail the galloping inflation. Fed policymakers have announced seven rate hikes for this year, which has raised concerns over the growth prospects amid a tight environment, which features squeezing liquidity and higher borrowing cost.

Apart from the Fed’s policy tightening, investors are uncertain over Thursday’s NATO meeting. As we have entered into the fourth week of Ukraine’s invasion by Russia with no potential indications of a ceasefire, investors are hoping for more pain ahead on intensifying fears of stagflation in Europe. Although the intention of the NATO meeting will remain a diplomatic solution to make a truce between Moscow and Kyiv, multiple urges from NATO may call for additional sanctions on the Kremlin.

The US dollar index (DXY) is approaching 99.00 swiftly as the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (Fed) data, rose to 2.90% by the end of Monday’s North American trading session. Moreover, the CME’s FedWatch Tool is showing 60% odds for a 50 basis point (bps) interest rate hike in May’s Federal Open Market Committee (FOMC), which has underpinned the greenback against the kiwi.