The NZD/USD pair lacked any firm directional bias and remained confined in a range just below two-week tops, around the 0.7065 region through the first half of the Asian session.
A combination of factors failed to assist the pair to build on the previous day’s solid bounce from the key 0.7000 psychological mark and led to a subdued/range-bound price action on Wednesday. A sluggish open in the Asian equity markets was seen as one of the key factors that kept a lid on any meaningful upside for the perceived riskier kiwi.
On the other hand, a modest uptick in the US Treasury bond yields extended some support to the US dollar, which further collaborated towards capping gains for the NZD/USD pair. The greenback was further supported by the prospects for a relatively faster US economic recovery from the pandemic amid the impressive pace of coronavirus vaccinations.
This, along with US President Joe Biden’s infrastructure spending plan of more than $2 trillion, has been fueling speculations about an uptick in US inflation. This, in turn, raised doubts that the Fed will retain ultra-low interest rates for a longer period. Hence, the focus will remain on the release of the FOMC meeting minutes, due later this Wednesday.
Investors will look for clues if the conditions to begin tightening were discussed, which should continue to underpin the greenback. Apart from this, a scheduled speech by Fed Chair Jerome Powell on Thursday will play a key role in influencing the USD in the near term and assist traders to determine the next leg of a directional move for the NZD/USD pair.