NZD/USD rebounded from the August low of 0.6489 recently and has been stuck in a narrow range, consolidating ahead of the Federal Reserve Economic Symposium scheduled for August 27-28. The Relative Strength Index signals the recent downward-momentum has faded.
The Federal Open Market Committee minutes earlier had pulled down the pair on increased dollar strength, but NZD/USD managed to stage a comeback from the lows. Now, the currency pair is trading inside the range set in July, and the Fed Chairman Jerome Powell could use the economic symposium ahead to guide the market expectations.
FOMC minutes had indicated the central bank’s preference for an outcome-based approach rather than a calendar-based forward-guidance for the monetary policy. Also, its recent actions suggest no hurry to scale back its unconventional measures to counter the economic downturn. The committee had voted for the extension of U.S. Dollar liquidity swap lines further than the earlier deadline of March 31, 2021.
Fed in Focus
The NZD/USD could continue its pullback if hints are given that more of the same monetary approach will be offered in the next Fed decision on September 16.
Otherwise: any indication of a shift in the forward guidance might pull down NZD/USD. FOMC minutes had ruled out yield caps or targets as not appropriate for the current economic situation.
Suggestions indicating policy shift could change the market behaviour; earlier, FOMC minutes had revealed the opinion among the Fed members that strong fiscal policy support is necessary to ensure fast recovery in the labour market conditions.