NZDUSD keeps rallying and reaches fresh two-month highs above 0.6100

• The Kiwi rallies to fresh two-month highs past 0.6100.
• Hopes of a softer Fed tightening pace are crushing US Dollar demand.
• NZDUSD to consolidate over the next days/weeks – ANZ.

The New Zealand Dollar is going through a sharp two-day rally, boosted by a positive market sentiment on Friday. The pair has surged about 3.8% in the last two days to reach prices right above 0.6100 at the moment of writing.

Broad-based Dollar weakness has sent the NZD surging

The positive market sentiment following the release of US inflation data on Thursday has hammered the US dollar, boosting demand for the sentiment-linked Kiwi.

US Consumer inflation eased beyond expectations in October, with yearly inflation down to 7.7% from 8.2% in September. These data suggest that price pressures may have started to ebb which has spurred expectations of a ‘dovish pivot’ by the Federal Reserve.

Furthermore, news that Chinese authorities have decided to ease COVID-19 restrictions has buoyed market sentiment further, acting as a tailwind for the NZD, as New Zealand is one of China’s main trade partners.

In the economic calendar, the US Preliminary Michigan Consumer Sentiment Index anticipated a sharper-than-expected deterioration in November. Higher prices and concerns about the increasing interest rates are weighing on consumers’ confidence.

NZDUSD: Consolidation for the next days/weeks – ANZ

Looking forward, analysts at ANZ expect the pair to consolidate gains over the next days or weeks: “The US Dollar slumped sharply lower after the release of much softer than expected US CPI data (…) However, we’re not out of the woods yet, and US markets are still pricing in cuts from June, and if these get priced out, that could slow the USD’s adjustment (…) Local interest rates will also fall today, and that might slow further NZD progress a touch, and leave markets in more of a consolidatory mood for the next few days/weeks.”

Technical levels to watch