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On January 29th, Goldman Sachs analyst Kay Hay stated that given strong economic data and signs of stabilization in the labor market, the Federal Reserve is likely to maintain its current policy for the time being. However, we expect interest rate cuts to resume later this year, as the slowdown in inflation will allow the Fed to implement two more "normalization" rate cuts, bringing interest rates back to what the Federal Open Market Committee members consider a neutral level.January 29th - Former Federal Reserve Vice Chairman Richard Clarida stated that he expects Powell to avoid the topic of the dollar during todays question-and-answer session. He said, "The Fed is trying to avoid any and all discussion about exchange rates."Federal Reserve Chairman Jerome Powell will hold a monetary policy press conference in ten minutes.January 29th - The market can pay attention to a slightly technical detail: while the entire Federal Open Market Committee (FOMC) votes on the benchmark federal funds rate, only the seven members of the Federal Reserve Board vote on the interest rate on outstanding reserves (IORB). This rate typically moves in tandem with the federal funds rate. Today, all seven board members voted to keep the rate unchanged, which is usually the norm, even if some board members dissent on the federal funds rate decision. However, there were previous concerns that board members eager to push for rate cuts might express this inclination in the IORB vote. But this did not happen today.On January 29th, Pepperston analyst Michael Brown stated that the policy statement was largely unchanged, although the assessment of economic conditions was revised upward to reflect a "robust" pace of growth. He indicated that attention will shift to the press conference, where Federal Reserve Chairman Powell may mention that the current federal funds rate is within a reasonable range for the neutral rate, but he will likely firmly avoid any questions regarding what happens after May.

NZD/USD falls further below the 0.5800 level and nears the weekly low in response to USD strength

Daniel Rogers

Nov 03, 2022 18:09

 截屏2022-11-03 下午5.16.35.png

 

The 0.5835-0.5840 range attracts sellers on Thursday, as the NZD/USD pair declines for a second consecutive session. During the opening minutes of the European day, spot prices fall below the 0.5800 mark and appear poised to extend the overnight post-FOMC decline from the highest level since September 20.

 

In the preceding hour, the US dollar reversed an intraday fall and soared to a one-and-a-half-week high, which is regarded as the principal factor exerting downward pressure on the NZD/USD pair. Wednesday, the US central bank hinted at a future policy shift, but Fed Chair Jerome Powell dashed dovish hopes. Powell remarked that it was premature to consider a stop in the rate-hiking cycle and that the final rate will exceed expectations.

 

Powell's hawkish remarks indicate that the Fed will continue to raise interest rates to combat inflation. Recent increases in US Treasury bond yields continue to strengthen the dollar. Moreover, a reduced risk tone gives additional support for the safe-haven dollar and weighs on the risk-averse New Zealand dollar. Concerns about economic headwinds stemming from quickly rising borrowing prices and China's zero-COVID policy have a depressing effect on the market sentiment.

 

The underlying environment appears to overwhelmingly favor USD bulls, suggesting that the path of least resistance for the NZD/USD pair is down. Some selling below the weekly low, below 0.5775, will underline the negative outlook and pave the way for fresh near-term decline. Ahead of Friday's NFP report, market experts predict that the US ISM Services PMI will give early North American session impetus.


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