New Zealand Dollar Talking Points
NZD/USD[1] trades a fresh weekly high (0.7095) following a batch of mixed US data prints, and the exchange rate may continue to retrace the decline following the Federal Reserve interest rate decision[2] as it extends the series of higher highs and lows from the start of the week.
NZD/USD Climbs Back Above 200-Day SMA as Bullish Price Series Persists
NZD[3]/USD[4] climbs back above the 200-Day SMA (0.7043) after slipping below the moving average for the first time since March 2020, and the exchange rate may stage a larger rebound over the remainder of the month as fresh data prints coming out of the US point to ongoing slack within the economy.
The update to the Personal Consumption Expenditure (PCE) Price Index shows the headline reading climbing to 3.9% from 3.6% per annum in April, with the Fed’s preferred gauge for inflation widening to 3.4% from 3.1% during the same period. However, US Personal Spending unexpectedly held flat in May after expanding 0.9% the month prior, and the mixed data prints may encourage the Federal Open Market Committee[5] (FOMC) to retain the current course for monetary policy as the central bank braces for a transitory rise in inflation.
It remains to be seen if the FOMC will gradually adjust the forward guidance over the coming months as Fed officials project two rate hikes for 2023, but it seems as though the central bank will stick to the same script at the next interest rate decision on July 28 as Chairman Jerome Powell pledges to “provide advance notice before announcing any decision to make changes to our purchases.”
Until then, NZD/USD may continue to retrace the decline following the Fed rate decision
