The New Zealand dollar maintained its upward trend for four consecutive days on Friday when it reached 0.6065 because the U.S. dollar declined due to Federal Reserve independence concerns.
The market attention remains on U.S. May Personal Consumption Expenditures (PCE) data which will be released on Friday but the main focus has shifted to increasing political pressure on the central bank. President Donald Trump revealed this week that he plans to reveal his choice for Fed Chair Jerome Powell’s successor before Powell’s term ends in May 2023. Trump revealed that he has selected three to four candidates from his list.
The statements have revived concerns about potential threats to the Federal Reserve’s independence which creates monetary policy uncertainty and weakens the dollar value.
Chicago Fed President Austan Goolsbee attempted to calm market concerns by stating to CNBC that internal Fed decision-making processes stay protected from political interference even when a potential “shadow chair” is announced in advance.
The currency market has shown a reaction to this perceived threat. The NZD/USD pair received support from rising U.S. rate cut expectations and declining investor confidence in the dollar. The kiwi currency may continue its upward movement when Friday’s inflation data indicates a more dovish direction for the Federal Reserve.
