NZD/USD retreats from two-month low near 0.6020 ahead of the US Core PPI, FOMC minutes

• NZD/USD trades lower near 0.6020 ahead of US data and FOMC meeting minutes.
• The escalation of the Middle East conflict could put pressure on the Kiwi pair.
• US Dollar holds ground despite downbeat US Bond yields.

NZD/USD snaps the five-day winning streak, pulling back from the two-month high. The spot trades lower around 0.6020 during the European session on Wednesday. However, the pair faced challenges due to the correction in the US Dollar (USD) due to the possibility of a pause in the interest rate-hike cycle by the US Federal Reserve (Fed).

The prevailing sentiment is influenced by recent dovish comments from Federal Reserve officials, indicating a more cautious approach to monetary policy. A series of dovish remarks expressing concerns about elevated long-term US Treasury yields are molding the narrative around monetary policy, which keeps the Greenback defensive.

Atlanta's Fed President Raphael Bostic, asserting that the current policy is already restrictive, along with similar sentiments from other Fed colleagues, implies a prudent stance regarding potential future rate hikes.

Wednesday features the Producer Price Index (PPI) following the release of the FOMC meeting minutes and Thursday brings the Consumer Price Index (CPI). On the Kiwi docket, Business NZ PMI will be eyed on Friday.

The US Dollar Index (DXY) holds grounds around 105.80 at the time of writing despite the downbeat US Treasury yields. 10-year US Treasury bond yield stands lower at 4.56%, down by 1.89%.

On the flip side, the Reserve Bank of New Zealand (RBNZ) opted to maintain the Official Cash Rate (OCR) at 5.5% in its last policy meeting. The central bank expressed agreement that interest rates might need to be maintained at a restrictive level for an extended period, as highlighted in the RBNZ statement.

This stance likely played a role in contributing strength to the recent performance of the Kiwi pair.

Additionally, the escalation of the Middle-East conflict may exert pressure on the NZD/USD pair. During periods of geopolitical uncertainty, safe-haven currencies like the USD typically attract increased buying support.