NZD/USD Remains Depressed Below Mid-0.6100s Amid Stronger USD, Ahead Of US PCE Price Index

The NZD/USD pair attracted some intraday sellers near the 0.6160 area on Friday and remained defensive early in the European session. The pair remains within striking distance of its lowest level since March 10, touched earlier this week and is pressured by resurgent US Dollar (USD) demand.

The USD Index, which tracks the Greenback against a basket of currencies, touches a fresh weekly high and continues to draw support from firming expectations for another 25 bps lift-off at the next FOMC meeting in May. The US central bank’s bets for additional rate hikes were reaffirmed by the US macro data released on Thursday, which indicated persistent inflationary pressures and that the US job market remains healthy despite an economic slowdown.

The Greenback gets an additional boost from the Bank of Japan (BoJ)-inspired Japanese Yen (JPY) sell-off. A softer risk tone benefits the safe-haven buck and is a headwind for the risk-sensitive Kiwi. The markets, however, have been pricing in a pause in the Fed’s rate-hiking cycle after May. This, in turn, is holding back the USD bulls from placing aggressive bets and lending some support to the NZD/USD pair, at least for now.

Traders also seem reluctant and remain on the sidelines ahead of Friday’s release of the US Core PCE Price Index – the Fed’s preferred inflation gauge. The crucial US macro data will influence the near-term USD price dynamics and provide some meaningful impetus to the NZD/USD on the last day of the week. Besides, traders will take cues from the broader risk sentiment to grab short-term opportunities heading into the weekend.

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