The NZD/USD pair experienced a robust recovery from its one-week low of 0.6030-0.6025 reached on Thursday, gaining momentum during the early part of the European session. The spot prices have climbed to the 0.6075-0.6080 range in the past hour, reversing the previous day’s decline.

The US Dollar (USD) struggles to extend its rebound from the weekly low on Wednesday and faces renewed selling pressure. This development is considered a significant factor driving the NZD/USD pair higher.

However, the overall market remains uncertain about the future rate-hike trajectory of the Federal Reserve (Fed). Recent dovish statements from several Fed officials have reinforced expectations of a potential pause in the US central bank’s tightening cycle.

As a result, market projections indicate a higher likelihood of the Fed maintaining interest rates at its upcoming policy meeting scheduled for June 13-14.

Nonetheless, recent inflation and labor market data from the United States (US) have sustained hopes for a 25 basis points rate increase next week. Additionally, surprise rate hikes by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) this week imply that the battle against inflation continues, bolstering prospects for further tightening by the Fed.

The prevailing market sentiment supports elevated US Treasury bond yields, which, coupled with cautious investor sentiment, act as limiting factors for the safe-haven US dollar and potential gains for the comparatively riskier New Zealand dollar (Kiwi).

Market sentiment remains fragile due to increasing concerns about a global economic slowdown, particularly in China. These concerns resurfaced following the release of data on Wednesday, revealing that China’s trade surplus reached a 13-month low in May, primarily due to a decline in exports.

This data indicates weak international demand for Chinese goods and adds to the challenges faced by the world’s second-largest economy.

Furthermore, the Reserve Bank of New Zealand (RBNZ) has explicitly signaled the end of its most aggressive hiking cycle since 1999. This stance may continue to undermine the value of the New Zealand Dollar (NZD), suggesting that the NZD/USD pair is more likely to trend downward. As a result, bullish traders should exercise caution in their approach.


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