• NZD/USD peaks near 0.6200, then stabilizes around 0.6160 to then recover to 0.6190.
• Fed’s Powell hints at more rate hikes and a spooky outlook required to reduce inflation.
• USD gains recovers traction on the back of rising bond yields and falling stock indexes.

On Wednesday, the NZD/USD faces some volatility jumping to a high of 0.6200 and then stabilizing at 0.6190 as during the mid-American session, Federal Reserve (Fed) Chair Jerome Powell’s hawkish comments helped the USD gain traction. In that sense, a risk-averse market signaled by falling stock indexes and a strong Dollar may limit the Kiwi’s gains.

Bond yields rise while US Stocks fall following Powell’s comments

In his testimony before the US Congress, Jerome Powell, Chair of the Federal Reserve (Fed), commented that, “nearly all FOMC participants expect it will be appropriate to raise interest rates somewhat further by year-end” and that, “reducing inflation is likely to require a period of below-trend growth, some softening of labor market conditions.” In that sense the expectations of more hikes combined with the “cost” of reducing inflation worsened the market’s mood and gave the US Dollar traction.

In response, the US bond yields are seeing gains across the curve. The 10-year bond yield has risen to 3.77%, while the 2-year yield stands at 4.74% and the 5-year yields 4.01%, respectively. Elsewhere, on Wall Street, stock markets weaken, as all three major indices fall into negative territory. The S&P 500 index, also known as SPX, has experienced a slight decline of 0.42%. Similarly, the Dow Jones Industrial Average, or DJI, has seen a modest drop of 0.45%, while the Nasdaq Composite (NDX), has recorded a decrease of 0.34%.

The focus now shifts to US Jobless Claims from the second week of June, to be released on Thursday and the S&P manufacturing PMI from the month of June on Friday, where investors will get additional information regarding the US economy and continue modeling their expectations towards the next Fed meeting in July