NZD/USD snaps 2-day losing streak ahead of Powell testimony, NZ May trade data

Key points

NZD/USD looked set to snap a two-day streak of losses on Wednesday ahead of New Zealand’s trade figures for May and Federal Reserve Chair Jerome Powell’s appearance before the House Financial Service Committee later in the day.

Powell is expected to deliver a rather hawkish message in his testimony, which is due to begin at 14:00 GMT.

“Despite having paused last week, the Fed officials … still surprisingly aggressively forecasted another 50 basis points in hikes by end 2023,” currency analysts at Maybank wrote in a note to clients, cited by Reuters.

“It is crucial to see whether (Powell) would more strongly drive home the point that the Fed is serious about another 50 bps of hikes or give the impression that they are ‘data dependent’. The former may do more to give additional support to send the dollar index and yields higher.”

The US Dollar Index was up 0.05% to 102.588 on Wednesday, while extending a rebound from last Friday’s one-month low of 102.006.

Meanwhile, New Zealand probably recorded a NZD 0.350 billion trade deficit in May, according to market consensus. The country’s trade surplus narrowed to NZD 0.427 billion in April this year from NZD 0.469 billion in April 2022, since imports rose at a faster rate, 12%, to reach NZD 6.38 billion. Imports of Petroleum and products soared 311.7% YoY in April.

The official trade data will be released at 22:45 GMT.

As of 7:32 GMT on Wednesday NZD/USD was edging up 0.13% to trade at 0.6175. Yesterday the major Forex pair went down as low as 0.6134, a level not seen since June 13th, as the kiwi was dragged down with its Australian counterpart by China’s lesser-than-expected loan prime rate cuts. This has been the first reduction in 10 months in support of a sluggish economic recovery.