NZD/USD eyes to recapture 0.6500 on positive market mood, US Core PCE eyed

• NZD/USD is aiming to recapture 0.6500 as the risk-on impulse is dominating the FX domain.
• A spree of jumbo rate hikes by the RBNZ has triggered the recession fears.
• The DXY is expected to report more losses on weak economic data.

The NZD/USD pair is advancing gradually higher in the early Asian session after hitting a low of 0.6455 on Thursday.  The pair is displaying a consolidation on a broader note and eventually a squeeze in volatility, which will be followed by a breakout in the same. The trading range in the asset after the monetary policy announcement by the Reserve Bank of New Zealand (RBNZ) has been 0.6437-0.6500.

It seems like a set trading range after the announcement of the interest rate decision by the RBNZ has puzzled the market participants as they are unable to decide whether to ditch kiwi bulls or not. The RBNZ featured a consecutive Official Cash Rate (OCR) hike by 50 basis points (bps) as the central bank is deploying all necessary measures to contain the soaring inflation. However, a spree of prompt actions by the RBNZ by stepping up their OCR has pressed the recession button. The continuation of an extreme hawkish monetary policy by the RBNZ will squeeze liquidity from the market swiftly and the unavailability of the dirt-cheap money will force the corporate to stick to multi-filtered investments.

Meanwhile, the US dollar index (DXY) is expected to refresh its monthly lows amid positive market sentiment. The risk-on impulse has diminished the safe-haven’s appeal. The DXY has been hammered on Thursday on lower than expected Gross Domestic Product (GDP) numbers. The annualized GDP landed at -1.5% vs. -1.3% as expected. Also, the Personal Consumption Expenditure (PCE) prices remained stable at 7%.

Going forward, investors will focus on the Core PCE Price Index, which may tumble to 4.9% against the prior print of 5.2%. Apart from that, Michigan Consumer Sentiment Index (CSI) will hog the limelight, which is seen unchanged at 59.1.