NZD/USD edges lower to 0.6140 despite the hawkish remarks from RBNZ officials

• NZD/USD loses ground as RBNZ OIS rates continue to pare Friday's post-ANZ forecast firming.
• ANZ projected that the RBNZ would increase cash rates by a quarter point in February and April.
• RBNZ Governor Adrian Orr highlighted that inflation remains elevated before the Finance and Expenditure Committee on Monday.
• Dallas Fed Bank President Lorie Logan remarked that there is currently no pressing need to reduce interest rates.

NZD/USD retraces its recent gains observed on Friday, trading lower near 0.6140 during the Asian session on Monday. Despite the subdued US Dollar (USD), the NZD/USD pair experiences a decline due to the Reserve Bank of New Zealand (RBNZ) Overnight Indexed Swap (OIS) rates continuing to pare Friday's post-ANZ forecast firming.

Last week, ANZ projected that the RBNZ would increase cash rates by a quarter point in February and April amid elevated cost pressures, bringing them to 6.0%. The RBNZ is scheduled to hold its policy meeting for the first time this year at the end of the month.

Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr testified before the Finance and Expenditure Committee on Monday, addressing questions related to the November 2023 Financial Stability Report. Orr highlighted that inflation remains elevated, which is why the RBNZ has maintained the cash rate at 5.5%.

RBNZ Deputy Governor (Financial Stability) Christian Hawkesby also testified before the Committee, emphasizing that the New Zealand financial system remains robust. He noted that house prices have stabilized over the last six months, and the system is equipped to handle high-interest rates. Moreover, New Zealand Finance Minister Nicola Willis has announced that the government budget will be announced on May 30th.

The US Dollar Index (DXY) is on a downward trajectory, reflecting a prevailing risk-on sentiment in the market, especially ahead of the impending release of Consumer Price Index (CPI) data slated for Tuesday. Analysts anticipate a moderation in the CPI (Year-on-Year) for January to 3.0%, down from December's 3.4%. Additionally, the monthly CPI data is expected to dip to 0.2% from the previous 0.3%.

Dallas Federal Reserve (Fed) Bank President Lorie Logan remarked on Friday that there is currently no pressing need to reduce interest rates. She noted "tremendous progress" in curbing inflation but stressed the importance of further evidence to ensure the sustainability of this progress. This sentiment resonates with US Fed Chair Jerome Powell's dismissal of the idea of a rate cut in March, as conveyed during a press conference following the interest rate decision on January 31.