NZD/USD extends the losses due to the risk-on sentiment amid Israel-Gaza conflict

• NZD/USD continues the losses on fears over the escalating Middle-East situation.
• Fed Chair Powell's recent statements provided some support for the pair.
• Upbeat US data is reinforcing the strength of the US Dollar.

NZD/USD extends the losing streak that began on Tuesday, trading lower around 0.5820 during the Asian session on Friday. The risk-on sentiment prevails, driven by escalating fears of a conflict in the Middle East, particularly due to the preparations for a potential ground invasion of Gaza by Israel.

While the geopolitical tensions weigh on the NZD/USD pair, Federal Reserve Chairman Jerome Powell's recent statements provided some support. Powell indicated that the central bank has no plans to raise rates in the short term, offering a respite for the pair. However, Powell also emphasized that future policy adjustments would depend on economic indicators, particularly growth and labor market conditions.

The scheduled address by US President Joe Biden on Thursday underscores the global significance of the Middle East situation, raising concerns about potential broader impacts on currency markets.

The US Dollar Index (DXY) rebounds from weekly lows, reaching around 106.40. Higher US Treasury yields and robust economic data, including a drop in Initial Jobless Claims to their lowest since January, contribute to the dollar's strength. However, challenges in the housing market, reflected in a 2.0% MoM decline in existing home sales, highlight some economic headwinds.

The recent New Zealand Trade Balance figures reveal a close resemblance to the previous month's data. In September, the headline Trade Balance recorded a deficit of $2.329 billion, slightly surpassing August's deficit of $2.273 billion.

During the week, the headline Consumer Price Index (CPI) for the third quarter increased to 1.8%, falling short of the expected 2.0%. The yearly rate also decelerated from 6.0% to 5.6%, missing consensus estimates of 5.9%. This data has led investors to adjust their expectations for a November interest rate hike by the Reserve Bank of New Zealand (RBNZ), resulting in downward pressure on the NZD/USD pair.

In China, the People's Bank of China (PBoC) maintains Loan Prime Rates unchanged, and China's Retail Sales (YoY) rose by 5.5%, surpassing expectations.