NZD/USD snaps losses post FOMC minutes, RBNZ decision

After losing for a second week in a row, the NZD/USD pair is trading unchanged at 0.5933. Following hawkish FOMC minutes, US Treasury yields are slightly rising. According to RBNZ Governor Orr, a slight recession is necessary.

The NZD/USD traded with little losses near 0.5930 on Thursday. On the one hand, after the release of the FOMC minutes from the July meeting, the US announced Jobless Claims data from the second week of August and appeared to gain momentum on the back of rising US yields.

In contrast, the NZD trades weakly versus the majority of its competitors due to the gloomy forecast provided by the Governor of the Reserve Bank of New Zealand.

On the data front, the second week of August’s Jobless Claims number was lower than anticipated at 239,000 vs. the projected 240,000 and lower than the previous week’s estimate of 250,000. Additionally, the manufacturing index from the Philadelphia Fed came in higher than anticipated at 12 vs. the forecast of -10.

The US 10-year bond yield increased to 4.28%, its highest level since October 2022, while other shorter-term yields reached new monthly highs of 4.95% and 4.40% for the 2 and 5 year rates, respectively.

The strong US economy may be to blame for this, as the FOMC minutes from the July meeting revealed that members were worried about the potential upside risks of inflation and left the door open to another hike.

The RBNZ kept interest rates for Kiwis at 5.5% on Wednesday, as was predicted. Regarding the statement’s forward guidance, it noted that the decisions would be determined by data and appeared to provide room for another raise if inflation picks back up.

A modest recession, according to Governor Orr, “is the bare minimum we need to see” in order to get inflation back on goal. In that regard, it appears that the NZD is being affected by this pessimistic view.