NZD/USD fell to its lowest point since November 2022, below 0.5900 then settled back above.
US yields rose after Powell’s words at the Jackson Hole Symposium.
Swaps markets reprice chances of a hike by the Fed in November and December.
In Friday’s session, the USD is one of the top performers, helped by a hawkish remark by the Federal Reserve (Fed) chairman at the Jackson Hole Symposium. On the other hand, New Zealand’s calendar had nothing relevant to offer. Eyes on potential Chinese government support to the real state sector of China.
After markets being cautious during the week, looking for clues regarding the next Fed’s moves, Chair Powell gave some clarity. He pointed out that the bank will retain its policy at restrictive levels until the economy shows signs of cooling down, accompanied by lower inflation. He then commented that the Fed will proceed carefully concerning the incoming data regarding the next decisions.
That being said, Thomas Barking and Loretta Mester also spoke. Barkin commented that the Fed will “clearly hold” through the end of the year, while Mester stated that the bank probably has some more work to do. In addition, the latter stated that she doesn’t see the Fed cutting in 2024.
As a reaction, according to the CME FedWatch, markets are buying the hawkish rhetoric, with the odds of a 25 basis point (bps) hike rising to nearly 44%. In line with that, the 2,5 and 10-year US Treasury yields rose to 5.07%, 4.46% and 4.23% respectively, boosting the USD.
On the Kiwi side, it faced selling pressure during the week due to the Chinese economic woes, as China is one of its biggest trading partners. That said, reports suggest that the Chinese government will take action to relieve the housing sector. Those measures aim to encourage homebuying by removing restrictions on first-time buyers and providing tax rebates. Still, their effectiveness is limited due to existing market challenges and investor scepticism, as reflected in the continued poor performance of China's equities
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