■ NZD/USD scales higher for the seventh straight day and climbs to a fresh multi-week top.
■ Delayed RBNZ rate cut bets underpin the NZD, though some USD dip-buying caps gains.
■ Geopolitical tensions might further contribute to keeping a lid on any meaningful upside.
The NZD/USD pair gains positive traction for the seventh successive day on Thursday and hits a nearly five-week high during the Asian session. Spot prices, however, remain capped near the 0.6200 mark and retreat a few pips in the last hour amid the emergence of some US Dollar (USD) buying.
The minutes of the January FOMC policy meeting, released on Wednesday, showed that policymakers were concerned about cutting interest rates too quickly. This remains supportive of elevated US Treasury bond yields and underpins the buck, which, in turn, is seen acting as a headwind for the NZD/USD pair. That said, a positive tone around the equity markets keeps a lid on any meaningful appreciating move for the safe-haven Greenback and lends some support to the risk-sensitive Kiwi.
The New Zealand Dollar (NZD) further benefits from the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr’s recent comments, which fuelled speculations that the central bank will delay cutting its benchmark rates. Orr said that inflation is moving in the right direction but there is more work to do to have inflation expectations truly anchored at that 2% level. The latest survey showed that two-year inflation expectations are seen rising to 3.2% vs a 3.0% growth estimated before.
The NZD/USD bulls, meanwhile, seem rather unaffected by weaker New Zealand Trade Balance data, which showed a deficit of NZD 976 million in January as compared to the previous month's fall of NZD 368 million. This, in turn, suggests that the path of least resistance for spot prices remains to the upside and supports prospects for an extension of over a one-week-old uptrend from mid-0.6000s. That said, a further escalation of conflict in the Middle East might keep a lid on any further gains.
Moving ahead, traders now look forward to the US economic docket – featuring the release of the usual Weekly Initial Jobless Claims, the flash PMI prints and Existing Home Sales data later during the North American session. Apart from this, Fed Governor Philip Jefferson's scheduled speech and the US bond yields will influence the USD price dynamics. This, along with the broader risk sentiment might provide some impetus to the NZD/USD pair and produce short-term opportunities.
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