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NZD/USD Encounters a Fresh 2023 Nadir Near 0.5825 As Investors Await Fed Chair Powell
For the third consecutive day, the NZD/USD pair has declined, reaching its lowest point since November 2022. The major is weighed down by the Israel-Hamas conflict and hawkish Fed expectations, which underpin the greenback. Traders seek some momentum from US macroeconomic data prior to the speech of Fed Chair Jerome Powell.
Amid intense selling pressure for the third consecutive day and the sixth day of a negative trend in the previous seven, the NZD/USD pair plummets to its lowest level since early November 2022 on Thursday during the Asian session. Currently trading near the 0.5825 region, spot prices are down more than 0.40 percent for the day and appear susceptible to a continuation of the recent downward trend from the 0.6055 region, or the monthly high reached last week.
Increasing concerns that the Israel-Hamas conflict could spill over into the Middle East region continue to undermine market sentiment, particularly in light of reports that hundreds of Palestinians were slain in a Gaza hospital. As a result, the safe-haven US Dollar (USD) is perceived to benefit, while flows are diverted from the risk-sensitive Kiwi. Increasing consensus that the Federal Reserve (Fed) will maintain elevated interest rates for an extended period of time also contributes to the strengthening of the US dollar and the depreciation of the NZD/USD pair.
The optimistic US Retail Sales figures released on Tuesday provided indications of a robust third-quarter economy and elevated projections for Q3 GDP. Fears of persistent inflation were further exacerbated by the data, potentially enabling the Federal Reserve to maintain its aggressive approach and extend interest rate hikes. Subsequently, this results in a prolonged decline in the value of fixed-income securities in the United States and further escalates the yields on Treasury bonds. Indeed, the yield on the standard 10-year government bond surges to its highest level in sixteen years and approaches the 5% threshold.
However, current market pricing indicates a greater likelihood that the US central bank will maintain interest rates unchanged in November for the second consecutive time. Consequently, this hinders USD bulls from placing aggressive wagers and provides the NZD/USD pair with little support. For a renewed impetus, traders are currently focusing on US macro data, including Weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, and Existing Home Sales data. Nonetheless, the attention will be riveted on the speech that Fed Chair Jerome Powell is slated to deliver later in the US session.
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