As prices continue to consolidate close to multi-month lows, the AUD and NZD were trading lower on Tuesday. The U.S. Dollar and Treasury yields have helped keep inflation in check. This week’s surprising Fed announcement, which extended the timeframe for the next interest rate hike, is garnering the most backlash.
The yield on the 10-year Treasury note increased to 1.50%.
The 10-year Treasury yield increased to 1.50% on Tuesday morning, with investors expecting Chairman Powell’s testimony to Congress on the Fed’s response to the coronavirus pandemic.
The benchmark 10-year Treasury yield fell less than a basis point to 1.501% at 08:55 GMT. The yield on the 30-year Treasury bond climbed to 2.115%.
The US dollar has dropped in value following Powell’s testimony.
The USD climbed versus the Aussie and Kiwi dollars after traders sought direction from Fed Chair Powell about the central bank’s recent unexpected shift in policy outlook. The greenback climbed sharply this week, although it dropped on Monday to return some of that gain.
U.N. Secretary-General Kofi Annan is to testify before a U.S. House of Representatives subcommittee investigating the coronavirus crisis.
In prepared testimony issued earlier on Monday, the Fed Chair stated that while the economy has achieved improvement, it still faces continuing dangers from the COVID-19 pandemic.
“Global immunisation and the unprecedented measures that follow are helping to shore up the recovery.” Data indicates economic activity and employment are getting stronger, and the GDP is projected to post its highest annual growth in decades, Powell said. The rebound in activity reflects much of this expansion.
Q2 New Zealand Consumer Confidence
Consumers’ confidence rose in the second quarter because of expectations that economic conditions would improve throughout the year, according to a study released on Tuesday.
The Westpac-McDermott Miller consumer confidence index increased to 107.1 from 105.2 in the previous quarter. Above 100 shows more optimists than pessimists.
The study concluded that people expect a positive economic outlook for the next year.
Inflation expectations increased last week, which signals a higher-than-expected interest rate hike. Treasury yields surged, sending the dollar substantially higher, causing a dramatic sell-off in the Aussie and Kiwi.
On Tuesday, AUD/USD and NZD/USD could decline if Powell once again suggests a sooner-than-expected rate hike is feasible, as long as the labour situation does not worsen.
Prior to the Fed’s move from dovish to hawkish, Fed policymakers were long-term dovish in their beliefs. Despite this most recent flexibility, anything is possible on Tuesday. Powell is not expected to say anything positive about the AUD and NZD, thus downside risk still exists.