The NZD/USD currency pair is making strides to establish stability above the significant round-level resistance of 0.6200 during the London session. The Kiwi asset is anticipated to maintain its bullish trajectory, as the US Dollar Index (DXY) faces challenges in staying above the 102.00 mark.
Investors in London are expressing worries about the economic outlook of the United States, resulting in substantial losses in S&P500 futures.
Federal Reserve (Fed) Chair Jerome Powell’s testimony before Congress suggests that more interest rate hikes are deemed appropriate, with further policy tightening expected to temper economic prospects. This risk-averse sentiment has diminished the appeal of assets sensitive to market fluctuations.
The US Dollar Index (DXY) is projected to experience a notable decline after falling below the 102.00 level. The negative bias in the USD Index has emerged following dovish comments from Atlanta Fed President Raphael Bostic and Chicago Fed Bank President Austan Goolsbee. Both policymakers favor postponing another interest rate increase by the US central bank to assess the impact of previous rate hikes.
Conversely, the New Zealand Dollar is displaying strength owing to the accommodative interest rate policy implemented by the People’s Bank of China (PBoC). The PBoC has reduced its Loan Prime Rate (LPR) in an effort to revive economic optimism, which was significantly hampered by pandemic-related control measures.
According to Reuters, the PBoC’s dovish monetary approach is negatively impacting the profit margins of commercial banks, as households and businesses are reluctant to take on additional credit due to weakened financial positions.
It is noteworthy that New Zealand is a prominent trading partner of China, and the increased monetary stimulus in China is expected to provide support to the New Zealand Dollar.
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