NZD/USD hovers near 0.5550 as the market weighs hawkish Fed expectations against warnings that the US Dollar rally may have run too far, too fast.
The pair is holding losses near the lower end of its four-week band at around 0.5550, with the year-to-date low of 0.5527 within reach after rejection at 0.5650. Hot US CPI on Tuesday boosted expectations of a Fed rate hike in December, widening the policy gap with the RBNZ, which kept rates on hold in late October. A possible USD pullback, as BBH warns the dollar rally may have overshot, is the main counterweight.
The Greenback has outperformed its peers this week after hot US CPI figures on Tuesday boosted hopes of at least a quarter-point Fed hike at the December meeting, with several officials endorsing the hawkish stance. However, BBH cautions the USD rally may have run too far, too fast, tempering the upside.
The New Zealand Dollar remains under pressure, trading near 0.5550 as the US Dollar continues to benefit from hot CPI data released Tuesday. While expectations for a December Fed rate hike remain elevated, analysts at BBH suggest the greenback may have overshot its fair value, potentially limiting further gains.
Hot US inflation figures on Tuesday strengthened expectations the Fed will hike rates in December, while the RBNZ kept its own rates on hold in late October, making the US Dollar relatively more attractive and pushing NZD/USD toward its year-to-date low of 0.5527.
Possibly: analysts at Brown Brothers Harriman argue the US Dollar has overshot levels implied by rate differentials and that expectations for a 50bps December hike may be tempered, which could lead to some dollar repositioning in the coming days.
Hot US Consumer Price Index figures on Tuesday heightened hopes that the Federal Reserve will raise interest rates by at least a quarter point at its December meeting, and Fed officials have endorsed that hawkish view.