NZD/USD struggles to build on intraday recovery beyond 0.6000, US macro data in focus

• NZD/USD is attracting some bearish buyers following the previous day’s decline following the RBNZ.
• Dovish Fed expectations and a positive risk tone undercut the USD, lending support.
• Traders are now looking at US macro data and the Fed is talking about near-term opportunities.

The NZD/USD pair is making a modest recovery after hitting a new weekly low earlier this month and returning to the psychological 0.6000 level in the first half of the European session. Spot prices, for now, appear to have stalled the previous day’s Reserve Bank of New Zealand (RBNZ)-inspired pullback from the region of 0.6085, or a four-week high, and are drawing support from subdued US dollar price action (USD).

The US Consumer Price Index (CPI) report on Wednesday provided further evidence of cooling inflationary pressures and reaffirmed market bets for an imminent start to the Federal Reserve’s (Fed) rate-cutting cycle. This in turn keeps USD bulls on the defensive and provides some support to the NZD/USD pair amid a generally positive tone around equity markets, which tends to support demand for risk-sensitive Kiwis. That said, any significant appreciation movement appears elusive as a result of the RBNZ’s dovish tilt.

The central bank cited recent progress in meeting its annual inflation target and weak domestic growth behind the surprise decision to cut the official cash rate (OCR) for the first time since March 2020. The RBNZ also indicated more cuts in next, which, along with concerns about an economic downturn in China, could undermine antipodean currencies, including the New Zealand dollar (NZD). This in turn calls for some caution before placing new bullish bets around the NZD/USD pair.

Moving forward, investors are now looking forward to the US economic plan – which includes the release of monthly retail sales figures, the usual weekly initial jobless claims, the Empire State Manufacturing index and the Philly Fed Manufacturing index. This, along with speeches from influential FOMC members, will play a key role in boosting USD demand and provide further impetus to the NZD/USD pair later in the early North American session. Apart from this, the broader sense of risk should help produce short-term trading opportunities.