The NZD/USD pair lacked any firm directional bias and seesawed between tepid gains/minor losses, below mid-0.6900s through the early European session.
A softer tone around the US Treasury bond yields triggered a modest US dollar corrective pullback from one-year tops touched in the previous day. This, in turn, was seen as a key factor that assisted the NZD/USD pair to find some support near the 0.6920 region on Wednesday. That said, the prevalent cautious mood around the equity markets kept a lid on any meaningful upside for the NZD/USD pair, at least for the time being.
Worries about a faster than expected rise in inflation and signs of a slowdown in the global economic recovery have been fueling concerns about stagflation. This, along with fears of a spillover from China Evergrand's debt crisis, continued weighing on investors' sentiment. Apart from this, prospects for an early policy tightening by the Fed helped limit the USD losses and further collaborated to cap gains for the NZD/USD pair.
Investors seem convinced that the Fed will begin rolling back its massive pandemic-era stimulus as soon as November. The markets have also started pricing in the possibility of an interest rate hike in 2022 amid expectations that the recent widespread rally in commodity prices will stoke inflation. Hence, the market focus will remain on Wednesday's release of the US consumer inflation figures for the month of September.
This will be followed by the FOMC meeting minutes later during the US session. This would assist investors to gauge the Fed's path on normalizing monetary policy, which will influence the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair. In the meantime, the broader market risk sentiment will be looked upon for some short-term trading opportunities.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2021 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.