NZD/USD remains above 0.5900 amid hawkish Fed, Kiwi Trade Balance, US PMI eyed

• NZD/USD remains firmer, possibly reflecting an improved risk appetite following the easing tensions between Israel and Iran.
• The hawkish sentiment surrounding the Fed’s rates trajectory in June could bolster the US Dollar.
• China Securities Journal suggested that the PBoC might lower the MLF rate to decrease funding costs.

The NZD/USD pair moves slightly lower to near 0.5920 during the Asian session on Tuesday. The New Zealand Dollar (NZD) found support from an improved risk appetite, bolstering the NZD/USD pair. This positive shift follows reduced geopolitical tensions in the Middle East, as highlighted by an Iranian official's recent statement indicating no immediate plans for retaliation against Israeli airstrikes, as reported by Reuters.

However, the upside potential for the NZD/USD pair appears to be capped due to a hawkish sentiment surrounding the Federal Reserve's (Fed) interest rate outlook for June. According to the CME FedWatch Tool, the probability of interest rates remaining unchanged in the June meeting has increased to 84.4%, up from the previous week's 78.7%.

Furthermore, comments from Federal Reserve officials suggest a more hawkish stance regarding the trajectory of interest rates in June, potentially strengthening the US Dollar (USD). According to a Bloomberg report, Chicago Fed President Austan Goolsbee stated on Friday that progress on inflation had "stalled," and the Federal Reserve's current restrictive monetary policy is suitable. Additionally, Reuters reported that Atlanta Fed President Raphael Bostic indicated that the US central bank would abstain from cutting interest rates until the end of the year.

On Tuesday, the China Securities Journal suggested the possibility of the People's Bank of China (PBoC) lowering the Medium-term Lending Facility (MLF) rate on May 15 to reduce funding costs. Given the strong trade relationship between China and New Zealand, such a move could potentially impact New Zealand's market and consequently affect the Kiwi Dollar.

Market participants will likely monitor New Zealand's monthly Trade Balance NZD data for March on Wednesday, followed by ANZ-Roy Morgan Consumer Confidence on Friday. In the United States (US), attention will be on the S&P Global Purchasing Managers Index (PMI) on Tuesday, with expectations of improvements in both the manufacturing and services sectors for April.