NZD/USD climbs as US Federal Reserve raises rates 0.25%; a Fed pivot looms

• NZD/USD stays above 0.6220s in a volatile session as Fed Chair Powell speaks.
• The removal of hawkish language in the monetary policy statement signals a possible Fed pivot.
• Fed Powell: If the US gets tip into a recession, I “hope it would be mild.”

The NZD/USD advances sharply, eyeing the 200-day SMA at 0.6255, after the US Federal Reserve (Fed) decided to raise rates by 25 bps, though it opened the door for a “possible” pause. As Fed Chair Jerome Powell speaks, the NZD/USD is trading volatile within the 0.6220-60 area at the time of writing.

The Fed would be data-dependent at upcoming meetings, including a possible pause

In his press conference, Federal Reserve Chair Jerome Powell said the Fed would take a data-dependent approach, and there are some signs that supply and demand in the labor market are returning to balance. He added that inflation pressures continued to run high, and if the US hits a recession, it would be mild.

Powell added that the US central bank is prepared to do more if warranted and emphasized the Fed’s goal to restore price stability while adding that rates would remain higher “for a while.”

On Wednesday, the Fed Chair Powell and Co. voted to raise rates to the 5.00% - 5.25% area, though tweaked its language regarding additional rate hikes. The Fed shifted to being data-dependent and will asses future decisions based on information about the economy, inflation, and the overall financial markets behavior.

Federal Reserve officials added that ongoing tightening of credit conditions could aid the US central bank to achieve its 2% inflation goal. Despite removing some hawkish language from the monetary policy statement, policymakers reiterated that inflation is high and that the labor market is tight. Therefore, June’s meeting would likely be live, even though the futures markets had begun to price in the first rate cut in September. Concerning the balance sheet reduction, the Quantitative Tightening (QT) would continue as planned.

NZD/USD Technical Levels