NZD/USD AIMS TO RECAPTURE 0.6200 DESPITE FED PREPARES FOR SECOND 25 BPS RATE HIKE

The NZD/USD pair has shown a recovery move from 0.6167 and is focusing to recapture the round-level resistance of 0.6200 in the early Asian session. The upside bias in the kiwi asset looks solid despite the Federal Reserve (Fed) is preparing for a consecutive 25 basis point (bp) rate hike for its March monetary policy.

S&P500 carry forwarded Monday’s recovery in Tuesday’s session and settled it on a promising note. This portrays a risk-on market mood as investors have digested the continuation of the policy-tightening spree by the Fed. The US Dollar Index (DXY) is struggling in maintaining its auction above 103.20 as investors are still not convinced that a liquidity influx of $30 billion into the First Republic Bank would safeguard it from the debacle.

Apart from the interest rate decision, guidance on borrowing rates through the Dot plot, inflation projections, and updates on the banking fiasco will be of utmost importance. Economist at UOB Group Lee Sue Ann suggested the Fed is likely to raise the Fed Funds Target Range by 25 bps at both its March and May gatherings. Fed chair Jerome Powell to bound to bring down the stubborn inflation and it would be interesting to see how he would handle the sticky inflation amid the banking sector shakedown.

On Tuesday, a solid recovery in United States Existing Home Sales data conveyed that the demand for real estate is recovering. Existing Home Sales in the US rose by 14.5% in February to an adjusted annual rate of 4.58 million, the National Association of Realtors (NAR) reported. It seems that cracked prices of real estate due to prolonged weaker demand amid higher interest rates have infused confidence among home buyers.

Meanwhile, the New Zealand economy is struggling to revive after the flood situation, which resulted in superlative liquidity flush into the economy and a vulnerable growth rate. However, the Reserve Bank of New Zealand (RBNZ) would continue to elevate the Official Cash Rate (OCR) to scale down persistent inflation.