NZD/USD moves away from multi-week top, eyes mid-0.6100s amid modest USD strength

• NZD/USD pulls back from a multi-week high and snaps an eight-day winning streak.
• The ed’s hawkish outlook revives the USD demand and exerts pressure on the pair.
• The downside seems limited ahead of this week’s RBNZ meeting and US macro data.

The NZD/USD pair comes under heavy selling pressure on the first day of a new week and retreats further from a five-week peak, around the 0.6215-0.6220 region touched last Thursday. Spot prices drop to the 0.6165-0.6160 area during the Asian session and for now, seem to have snapped an eight-day winning streak amid a modest US Dollar (USD) strength.

The late January FOMC meeting minutes, along with the recent hawkish remarks by influential Federal Reserve (Fed) officials, suggested that the US central bank is in no hurry to cut interest rates amid sticky inflation and a resilient US economy. The Fed’s higher-for-longer narrative remains supportive of elevated US Treasury bond yields and assists the USD to hold comfortably above a multi-week low, which, in turn, is seen exerting pressure on the NZD/USD pair.

Meanwhile, the risk of a further escalation of tensions between China and Taiwan, along with geopolitical tensions stemming from conflicts in the Middle East and the prolonged Russia-Ukraine war, keeps a lid on the recent optimism. This contributes to driving flows away from the risk-sensitive Kiwi, though the downside for the NZD/USD pair seems cushioned ahead of the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting on Wednesday.

Apart from this, investors this week will also confront the release of important US macro data, including the Prelim Q4 GDP and the Core PCE Price Index. This might influence the Fed’s future policy decisions, which, in turn, will drive the USD and provide some meaningful impetus to the NZD/USD pair. Moving ahead, traders on Monday will take cues from the US New Home Sales data to grab short-term opportunities later during the North American session.