• NZD/USD is demonstrating a sideways performance despite improving risk appetite.
• NZ PM Hipkins has announced that minimum wages will increase in line with inflation.
• US Biden’s commentary to protect US sovereignty from China might trigger US-China tensions again.

The NZD/USD pair is displaying back-and-forth moves around 0.6320 in the Tokyo session. The Kiwi asset has not reacted much to the announcement by novel New Zealand Prime Minister Chris Hipkins that minimum wages will be increased in line with the Consumer Price Index (CPI).

NZ Hipkins cited that the income insurance scheme will not continue as proposed and the policy should be refocused on the expense of living. He claimed that a rise in the minimum wage will have a small inflation impact.

It is worth noting that the Reserve Bank of New Zealand (RBNZ) has not confirmed that the interest rate has peaked despite a marginal slowdown in the fourth quarter figures. Therefore, even a minor upside trigger to the inflation rate could create significant troubles for the RBNZ.

Meanwhile, US President Joe Biden has addressed the State of the Union (SOTU) for the second time and the first time against the divided Congress. US President sounded tough on China citing “If China threatens US sovereignty, US will act to protect the country.”

Over tax reforms, US President has proposed to tax billionaires heavily by quadrupling corporate buyback taxes. S&P500 futures appear subdued, at the press time, but could turn volatile as more taxes on investors could trigger a sell-off. The risk appetite is improving as investors have digested the hawkish interest rate guidance from Federal Reserve (Fed) chair Jerome Powell. Also, the yields generated by 10-year US Treasury bonds have dropped to near 3.65%.