NZD/USD faces fragile hurdles above 0.6240 ahead of Fed Powell’s speech

• NZD/USD has sensed selling interest above 0.6240 as the focus has shifted to Fed Powell’s speech.
• The overall market mood is still upbeat as chances for US Treasury default have trimmed dramatically.
• The RBNZ is expected to hike interest rates by a final quarter point to 5.50% next week.

The NZD/USD pair has sensed selling pressure above 0.6240 in the Tokyo session. The Kiwi asset has attracted significant offers as the US Dollar Index (DXY) has rebounded firmly ahead of the speech from Federal Reserve (Fed) chair Jerome Powell.

The US Dollar Index has shown a decent recovery after a corrective move to near 103.43. More upside in the USD Index seems favored as investors are significantly optimistic for US debt-ceiling limit raise.

S&P500 futures have trimmed some gains in the Asian session. The overall market mood is still upbeat as chances for US Treasury default have trimmed dramatically. US President Joe Biden agreed to the US borrowing cap limit raise by compromising President’s spending initiatives.

Other US congressional leaders have shown frustration for US President Joe Biden on his willingness to involve in a bipartisan deal to increase the US borrowing cap limit as lower spending initiative in the budget would create tougher work requirements for food aid recipients, as reported by Reuters.

On the Kiwi front, upbeat Trade Balance data infused some strength in the New Zealand Dollar. Monthly Trade Balance (in NZ terms) has reported a trade surplus by $427M vs. a trade deficit of -$1,586M. However, the annual trade deficit has landed at -$16.8M, remaining close to the former release.

Going forward, investors will keep an eye on the interest rate decision by the Reserve Bank of New Zealand (RBNZ). According to a Reuters poll, RBNZ Governor Adrian Orr will hike interest rates by a final quarter point on Wednesday and then end its most aggressive tightening cycle since adopting the cash rate in 1999. Also, the RBNZ would keep its Official Cash Rate steady at 5.50% (after a quarter point hike on May 24) till the year end.