NZD/USD grapples to surpass the major level of 0.6350 following the five-month high

• NZD/USD may revisit the five-month high at 0.6369 as the Kiwi Dollar cheers risk-on mood.
• The market sentiment is biased toward the dovish Fed’s stance following the lower US bond yields.
• RBNZ may maintain a hawkish stance due to the improved Consumer Confidence and Business Confidence data for November.

NZD/USD hovers around 0.6350 during the European trading hours on Friday, grappling to approach the five-month high at 0.6369 marked on Thursday. The prevailing market sentiment, leaning towards the expectation of the Federal Reserve (Fed) cutting interest rates in the first quarter of 2024, is exerting pressure on US yields. The US Dollar Index (DXY) trades lower around 101.20, as both the 2-year and 10-year yields on US Treasury notes have declined to 4.26% and 3.83%, respectively, by the press time.

Market participants expect that the Reserve Bank of New Zealand (RBNZ) will maintain a hawkish stance by refraining from policy easing in the upcoming meeting. This sentiment is further bolstered by positive data releases, including improved Consumer Confidence and Business Confidence figures for November. The combination of these factors contributes to a positive outlook for the NZD, reflecting confidence in the RBNZ's hawkish stance on policy direction.

RBNZ Governor Adrian Orr's meticulous approach and acknowledgment of impending challenges, particularly in addressing elevated inflation, highlight the complexities of navigating the economic landscape. Additionally, ANZ analysts foresee a global resurgence in risk appetite, combined with the favorable interest rate differential of the NZD, contributing to upward momentum throughout 2024.

In the absence of high-impact data on the Kiwi's agenda for the upcoming week, traders are shifting their focus to China's Caixin Manufacturing PMI for December on Tuesday. The close trade partnership between China and New Zealand adds significance to this economic indicator. Meanwhile, on the United States docket, attention is directed toward the upcoming release of the Chicago Purchasing Managers' Index (PMI) for December, scheduled for Friday.