NZD/USD fails to surpass 0.6500 as risk-off impulse rebounds ahead of US PCE

• NZD/USD has attracted significant offers at 0.6500 on a firmer rebound in the DXY.
• Investors are getting risk-averse ahead of the US PCE.
• RBNZ’s warning signal for a potential recession has impacted the antipodean.

The NZD/USD pair has faced barricades around 0.6500 and has slipped to near 0.6460 in the early European session. Mounting uncertainty ahead of the US Personal Consumption Expenditure (PCE), which is due in the New York session, has diminished the risk appetite of the market participants.

The US PCE is expected to remain stable at 7% but stability in the catalyst at elevated levels is itself a cause of worry for the Federal Reserve (Fed).  Higher PCE levels dictate higher spending on durable and non-durable goods from the households, which could let inflationary pressures anchored at higher levels. No wonder, this will compel Fed chair Jerome Powell to dictate a mega rate hike along with an extremely hawkish stance for the upcoming monetary policies.

On the dollar front, the US dollar index (DXY) has established above 102.00 and is expected to remain sustained higher amid a rebound in the negative market sentiment.

Meanwhile, the kiwi dollar is also facing the headwinds of renewed recession fears. The 50 basis points (bps) rate hike announcement by the Reserve Bank of New Zealand (RBNZ) on Wednesday has pressed the recession button while tackling the ramping up inflation. RBNZ Governor Adrian Orr, in his statement, has warned that recession cannot be ruled out however he is not predicting one. It is worth noting that this is a consecutive jumbo rate hike by the RBNZ.