• NZD/USD struggles to recover from its lowest since November 2022.
• Fed is expected to adopt a hawkish stance; contributing to the strength of the US Dollar (USD).
• Higher US Treasury yields reinforce the Greenback’s winning streak.
• China-related concerns are weighing on the Kiwi pair.

NZD/USD trades around 0.5890 during the Asian session on Thursday, recovering from the lowest level since November 2022. However, the pair is facing downward pressure as investors price in the odds for a quarter basis points (bps) interest rate hike by the US Federal Reserve (Fed) through the end of the year 2023.

Additionally, the US Dollar (USD) is strengthening due to increasing acknowledgment that the Federal Reserve (Fed) intends to maintain higher interest rates for an extended period. This hawkish tone surrounding the central bank has emerged as a significant factor influencing the pair negatively.

Market sentiment is currently leaning towards the belief that the US Fed will adhere to its hawkish policy stance. This conviction has been further reinforced by positive US economic data released on Wednesday, which revealed an unexpected acceleration in business activity within the US services sector during August.

US ISM Services PMI exceeded expectations in August by reaching a six-month high reading of 54.5, surpassing the anticipated figure of 52.5 and the previous reading of 52.7. However, the S&P Global Composite and Services PMIs declined to 50.2 and 50.5, respectively, falling short of market estimates of 50.4 and 51.0.

It's noteworthy that the moderate performance of US economic indicators seems to provide downward pressure for the Kiwi pair.

US Dollar Index (DXY), which gauges the value of the US Dollar (USD) against six other major currencies, is hovering around 104.80. The prevailing hawkish sentiment regarding the Fed policy decision in the upcoming September meeting continues to bolster US Treasury yields.

The higher yields reinforce the confidence of buyers in the Greenback. At the time of writing, the 10-year US bond yield has climbed to 4.29%, marking a 0.23% increase.

Investor confidence remains subdued as concerns persist about the deteriorating economic conditions in China and the ongoing trade tensions between the United States and China. These China-linked risks are exerting downward pressure on the New Zealand Dollar (NZD) owing to the strong trade ties between the two nations.