NZD/USD improves to near 0.6260, risk-on sentiment after Fed’s Bostic comments

NZD/USD improves to near 0.6260, risk-on sentiment after Fed’s Bostic comments

Time Stamp: January 8, 2024 9:43 PM
Source Node: 3051854

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  • NZD/USD continues its winning streak on a risk-on-market mood.
  • Atlanta Fed President Raphael Bostic expects 50 bps rate cuts by the end of 2024.
  • Chinese Zhongzhi’s bankruptcy liquidation might have weighed on the New Zealand Dollar.
  • Traders await the Kiwi Building Permits on Thursday to gain fresh cues on New Zealand’s economic landscape.

NZD/USD moves on an upward trajectory, extending gains for the third successive session. The NZD/USD pair trades higher near 0.6260 during the Asian hours on Tuesday. The pair rebounded from a three-week low at 0.6181 on Friday after mixed economic data from the United States (US).

Additionally, the NZD/USD pair appears to be influenced by comments from Federal Reserve (Fed) members, suggesting potential rate cuts by the end of 2024. These remarks triggered a risk-on sentiment and contributed to downward pressure on the US Dollar (USD), consequently leading to an upward movement in the pair.

Atlanta Fed President Raphael W. Bostic's anticipation of two quarter-point cuts by the end of 2024 reflects a cautious approach, considering the decline in inflation more than initially expected. On the other hand, US Fed Governor Michelle W. Bowman's remarks suggest a watchful stance, stating that the current policy stance seems sufficiently restrictive, but acknowledging the possibility of lowering the Fed's policy rate if inflation moves closer to the 2% target.

The US Dollar Index (DXY) seems to extend its losses, trading near 102.10. The downbeat US Treasury yields weigh on the US Dollar with the 2-year and 10-year yields on US Treasury bonds standing lower at 4.37% and 4.02%, respectively, by the press time.

The news from China regarding the bankruptcy liquidation of Zhongzhi Enterprise Group, a major player in the country's shadow banking sector, might have introduced a barrier to the advancement of the New Zealand Dollar (NZD). With significant liabilities amounting to $64 billion, the financial struggles of Zhongzhi Enterprise Group raise concerns about contagion from the broader property debt crisis into the financial sector.

The focus on New Zealand Building Permits, especially ahead of the US Consumer Price Index (CPI) data on Thursday, highlights the potential impact on the NZD/USD pair. Additionally, Friday's Chinese Consumer Price Index (CPI) and Producer Price Index (PPI) figures will likely attract attention, considering the interconnected global economic landscape.

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