NZD/USD struggles to seize two-week high of 0.6270 as US Dollar bounces back

• NZD/USD faces pressure to grip a two-week high of 0.6270 due to a decent recovery in the US Dollar.
• Lower-than-expected US jobless claims data prompted US Dollar’s recovery.
• The NZ economy contracted at a slower-than-expected pace in the second quarter of this year.

The NZD/USD pair gains significantly by more than 0.5% but struggles to seize the two-week high of 0.6270 in Thursday’s North American session. The Kiwi asset faces slight pressure as the US Dollar (USD) has rebounded after the release of the United States (US) Initial Jobless Claims data for the week ending September.

The number of individuals claiming jobless benefits for the first time was 219K, lower than estimates of 230K, and the former release of 231K, upwardly revised from 230K. The impact of the better-than-expected jobless claims data is expected to be short-lived as market speculation for the Federal Reserve (Fed) interest rate cut path will pay a major role in its next move.

On Wednesday, the Fed delivered its first dovish decision in more than four years as policymakers are committed to restoring a higher Unemployment Rate and are confident that inflation is on track to return to the bank’s target of 2%. The Fed cut interest rates by 50 basis points (bps) to 4.75%-5.00%, and policymakers see federal fund rates heading to 4.4% by the year-end. On the contrary, traders expect interest rates to fall by a total of 125 bps this year to 4.00%-4.25%.

Meanwhile, the market sentiment is upbeat as investors expect the Fed to continue the policy-easing cycle aggressively. The S&P 500 has opened on a strong note, exhibiting a higher risk appetite of investors. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, recovers its intraday losses and bounces back above 101.00.

In the Asia-Pacific region, the New Zealand Dollar (NZD) strengthens as the domestic Q2 Gross Domestic Product (GDP) data came in better than expected. The NZ economy contracted by 0.2% after expanding by 0.1% in the previous quarter.

The pace at which the economy declined was slower than expectations of 0.4%. Going forward, investors will focus on the People’s Bank of China (PBoC) interest rate decision, which will be announced on Friday. It is worth noting that the NZ economy is one of the largest trading partners to China and a dovish decision by the PBoC would strengthen the Kiwi dollar.