- NZD/USD caught some fresh bids on Wednesday following the previous day’s sharp pullback.
- RBNZ rate hike expectations continued lending some support amid a subdued USD demand.
- The market focus remains on Wednesday’s release of the FOMC June policy meeting minutes.
The NZD/USD pair maintained its bid tone through the first half of the European session and climbed to fresh daily tops, around 0.7040 region in the last hour.
Having shown some resilience below the key 0.7000 psychological mark, the NZD/USD pair managed to regain some positive traction on Wednesday and was supported by a combination of factors. Investors brought forward their expectations for a rate hike by the RBNZ after a business survey in New Zealand showed a sharp improvement in confidence. This, in turn, was seen as a key factor that acted as a tailwind for the kiwi.
Apart from this, a subdued US dollar price action provided an additional boost to the NZD/USD pair and remained supportive of the intraday move up. Investors now seem convinced that the Fed will wait for a longer period before tapering its asset purchases or raising interest rates. This, along with an extension of the recent fall in the US Treasury bond yields, failed to assist the USD to capitalize on the overnight strong gains.
That said, the prevalent cautious mood – amid concerns about the spread of the highly contagious Delta variant of the coronavirus – extended some support to the safe-haven greenback. Market participants might also refrain from placing any aggressive bets, rather prefer to wait on the sidelines ahead of Wednesday’s release of the FOMC June meeting minutes. This might keep a lid on any runaway rally for the NZD/USD pair, at least for now.
Given that the Fed brought forward its timetable for the first post-pandemic interest rate hike, the minutes will now be looked upon for fresh clues about the central bank’s policy outlook. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair. In the meantime, the broader market risk sentiment might produce some short-term trading opportunities.