The NZD/USD pair experienced selling pressure above the 0.6240 level during the Tokyo session. The New Zealand Dollar attracted significant selling interest as the US Dollar Index (DXY) rebounded strongly ahead of Federal Reserve (Fed) Chair Jerome Powell’s upcoming speech.
Following a corrective move near 103.43, the US Dollar Index has shown a notable recovery. Market sentiment suggests further upside potential for the USD Index, driven by investor optimism regarding a raise in the US debt-ceiling limit.
S&P 500 futures saw a slight decline in the Asian session, although the overall market mood remains positive due to reduced concerns of a US Treasury default. US President Joe Biden agreed to compromise on his spending initiatives, leading to an increase in the US borrowing cap limit and alleviating frustrations among other US congressional leaders.
In the New Zealand Dollar market, positive Trade Balance data provided some strength. The monthly Trade Balance (in NZ terms) reported a trade surplus of $427M, a significant improvement compared to the previous trade deficit of -$1,586M.
However, the annual trade deficit remained relatively unchanged at -$16.8M.
Moving forward, investors will closely monitor the interest rate decision by the Reserve Bank of New Zealand (RBNZ).
According to a Reuters poll, RBNZ Governor Adrian Orr is expected to raise interest rates by a final quarter point on Wednesday, concluding the most aggressive tightening cycle since the adoption of the cash rate in 1999.
Additionally, the RBNZ is anticipated to maintain its Official Cash Rate at 5.50% (following a quarter point hike on May 24) until the end of the year.
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