NZD/USD corrects to near 0.6260 as investors turn cautious ahead of Fed policy

• NZD/USD has slipped to near 0.6260 as investors are trimming longs in risky assets ahead of Fed policy.
• It is highly likely that the Fed will elevate its interest rates to 2.25-2.50%, after a 75 bps rate hike.
• The RBNZ has announced that it will review the policy-tightening performance.

The NZD/USD pair has surrendered its entire gains after re-testing Monday’s high at around 0.6280 in the Asian session. The asset has tumbled to near 0.6260 and is likely to remain subdued as the investing community is turning cautious on expectations of one more interest rate hike by the Federal Reserve (Fed).

It is worth noting that the Fed has already elevated its interest rates by 1.5% in its previous three monetary policy meetings. To combat the inflation monster, policy tightening measures are extremely required and on Wednesday, Fed chair Jerome Powell will announce one more 75 basis points (bps) interest rate hike as expected by the market participants. This will elevate the Fed’s interest rates to 2.25-2.50%.  

Apart from the Fed’s interest rate policy, the US Durable Goods Orders also carry significant importance. The economic data is seen plunging to -0.2% from the prior release of 0.8%. A slippage in the aforementioned economic data indicates that the overall demand in the US economy is currently dominated by higher energy and food bills. And, a slippage in the demand for durable goods dictates lower buying interest of the consumers.

On the kiwi front, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr said on Tuesday that it is undertaking a review of its recent performance in conducting monetary policy, as per Reuters. The central bank will scrutiny the performance of inflation and employment catalysts, which will help them to identify the outcome of the monetary policy decisions.