The NZD/USD pair recovered slightly from a one-week low, but trade war concerns and the Federal Reserve's hawkish stance limit its upside potential.
The NZD/USD pair exhibited a modest recovery from its over one-week low on Friday amidst subdued demand for the US Dollar. The Federal Reserve 's hawkish pause and the rebounding US bond yields acted as a tailwind for the Greenback. However, fears of a trade war might restrict the pair's upward movement ahead of the US Personal Consumption Expenditure (PCE) Price Index data.
The NZD/USD pair attracted some buyers during the Asian session on Friday, snapping a three-day losing streak that took it to a one-week low around the 0.5620 area. Currently, spot prices hover around the 0.5640-0.5645 region, although the upside appears limited. A generally positive sentiment surrounding equity markets capped the US Dollar's recovery from a one-month low touched earlier this week, providing crucial support to the risk-sensitive Kiwi. Beyond this, the uptick lacks any clear fundamental catalyst and risks fading quickly within a bearish fundamental context. The Federal Reserve's hawkish pause on Wednesday diverges significantly from expectations for a more aggressive policy easing by the Reserve Bank of New Zealand (RBNZ). This divergence warrants caution before placing fresh bullish bets on the NZD/USD pair, considering persistent concerns regarding US President Donald Trump's protectionist trade tariffs. Additionally, anticipations that Trump's policies will reignite inflation contributed to a modest rebound in US Treasury bond yields. This bolstered the USD's weekly recovery gains from its one-month low, which should act as a factor capping the NZD/USD pair ahead of the PCE Price Index release
NZD/USD US Dollar New Zealand Dollar Trade War Federal Reserve Interest Rates PCE Price Index
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