NZD/USD regains 0.6200 despite downbeat NZIER forecasts, Fed’s Powell eyed

• NZD/USD picks up bids to snap two-day uptrend, eyes the biggest daily gain in a week.
• NZIER forecasts highlight inflation, interest rates as key headwinds for economy.
• Easing Covid numbers from China, help for ailing real-estate market favor sentiment.
• US CB Consumer Confidence, NZ Building Permits may entertain intraday traders.

NZD/USD snaps a two-day downtrend as it prints 0.75% intraday gains around 0.6205 during early Tuesday morning in Europe. In doing so, the Kiwi pair pays a little heed to the downbeat economic forecasts from the New Zealand Institute of Economic Research (NZIER) amid cautious optimism in the market.

NZIER released its quarterly economic forecasts earlier in the day and stated that rising interest rates and high inflation worldwide pose a threat to New Zealand’s economic recovery over the coming years. The economic update also conveyed hawkish expectations from the Reserve Bank of New Zealand (RBNZ) and dimmed the negative impacts of the announcement.

Also read: NZIER: Inflation and rising interest rates remain key headwinds for the economy

Elsewhere, an easing in China’s daily covid infections from an all-time high of 40,347, to 38,645, seemed to have triggered cautious optimism. On the same line could a rally in the Chinese reality stocks as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

Alternatively, hawkish comments from the US Federal Reserve (Fed) officials seemed to challenge the NZD/USD bulls ahead of the key event, namely Wednesday’s speech from Fed Chair Jerome Powell, the first since the November Fed meeting.

If we take a look at the latest Fedspeak, Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed President Loretta Mester marked the need to see several more good inflation reports and more signs of moderation to back the pause in rate hikes. On the same line, St. Louis Fed President James "Jim" Bullard stated that the situation calls for much higher interest rates than what we've been used to. Further, New York Federal Reserve Bank President John Williams said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation and keep them there for all of next year. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

Against this backdrop, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street. Further, the US 10-year Treasury yields remain depressed near 3.69% by the press time and weigh on the US Dollar amid the risk-on mood.

Looking forward, risk catalysts will be important for the immediate directions ahead of the US Confederation Board’s (CB) Consumer Confidence for November. However, major attention will be given to Fed’s Powell and then to Friday’s US jobs report for clear directions.

Technical analysis

NZD/USD rebound remains elusive unless it stays comfortably beyond the 200-DMA and refreshes the monthly high, respectively near 0.6241 and 0.6290 by the press time.