- NZD/USD reversed modest intraday losses amid subdued USD price action on Friday.
- The overnight less hawkish remarks by Fed officials kept the USD bulls on the defensive.
- Recession fears might limit losses for the safe-haven buck and cap the risk-sensitive kiwi.
The NZD/USD pair attracted some dip-buying on Friday and climbed back above the 0.6100 mark during the early European session. The pair was last seen trading near the daily high, around the 0.6130-0.6135 area and might now be looking to build on the overnight late rebound from over a two-year low.
Thursday's less hawkish remarks by Fed Governor Christopher Waller and St. Louis Fed President Jim Bullard forced investors to scale back bets for a supersized 100 bps rate hike on July 27. Both Waller and Bullard – the biggest Fed hawks – said they were not in favour of the bigger rate hike that the markets priced in following the release of red-hot US consumer inflation on Wednesday. This, along with a further decline in the US Treasury bond yields, kept the US dollar below a 20-year high touched the previous day and offered some support to the NZD/USD pair.
That said, any meaningful upside still seems elusive amid growing worries about a possible global recession. Investors remain concerned that rapidly rising borrowing costs, along with the ongoing Russia-Ukraine war and fresh COVID-19 curbs in China, would pose challenges to global economic growth. The fears were further fueled by Friday's disappointing release of the Chinese Q2 GDP print. This, in turn, should act as a tailwind for the safe-haven USD and keep a lid on any meaningful upside for the risk-sensitive kiwi, at least for the time being.
Investors might also refrain from placing aggressive bets and prefer to wait for important US macro data. Friday's US economic docket features the Empire State Manufacturing Index, Industrial Production figures and Michigan Consumer Sentiment Index later during the early North American session. Apart from this, a scheduled speech by Atlanta Fed President Raphael Bostic, the US bond yields and the broader market risk sentiment will influence the USD price dynamics. This, in turn, should allow traders to grab short-term opportunities around the NZD/USD pair.
