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HomeUncategorizedNZD/USD slumps to six-week low, sentiment sours after Powell speech

NZD/USD slumps to six-week low, sentiment sours after Powell speech

  • NZD/USD plunged more than 1% on Friday in a risk-off mood.
  • Powell says meeting Fed’s 2% target will “cause some pain for households and businesses” .
  • US inflation data showed signs of peaking, while US consumer confidence improved.

After Fed Chairman Jerome Powell reiterates Fed hawkishness NZD/USD fell to a fresh weekly low of 0.8150 on Friday following the remarks, restoring price stability to the bank’s 2% target. Furthermore, he acknowledged that it will “require a period of continued below-trend growth”. As a result, market sentiment turned sour and U.S. stocks plummeted.

NZD/USD falls on Powell’s hawkish remarks and upbeat US economic data

NZD/USD opened above 0.6220 during Asian time, after the release of US economic data and Powell The speech on Jackson Hole traded in the 0.6180-0.6220 range. However, NZD/USD moved up and down as volatility increased once Powell made his remarks, sending the major currencies to a one-week low. At the time of writing, NZD/USD is trading at 0.6148, well below the opening price. Summarizing Powell’s remarks that in a period of rising interest rates, weak labor market conditions and sluggish economic growth, lowering inflation will ” Some pain for families and businesses.” The Fed chair reiterated that the central bank will “reduce inflation to our 2% target” and commented that the central bank is taking swift steps to curb demand to better align with supply. Jay Powell welcomed the July inflation data, but was quick to add that on the direction of inflation, “a single month The improvement is nowhere near what the committee needs to see.” Powell noted that a neutral stance “is not the place to stop or pause,” bucking the market’s view of the Fed’s pivot policy, which has led to a 15% rebound in U.S. stocks from June lows.

In addition, the US economic calendar finally released the University of Michigan Consumer Confidence Index for August. The confidence index of US citizens improved to 58.2 from 55.2, while one-year inflation expectations fell to 4.8% from 5.2% the previous month.

Earlier Friday, the Fed’s favorite inflation gauge, headline and July core personal consumption expenditures (PCE) price index. Overall PCE rose 6.3% yoy, beating expectations of 6.2%, while core PCE excluding volatile items fell to 4.6% yoy versus 4.7% expected.

NZD/USD key technical level

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