New Zealand Dollar remains depressed as USD bulls look to crucial data amid Fed hike bets

• NZD/USD struggles to capitalize on the previous day’s bounce from the post-RBNZ swing low.
• Hawkish Fed expectations and geopolitical risks revive USD demand, weighing on spot prices.
• Traders now look to the Advance US Q3 GDP report and the US PCE data for a fresh impetus.

The NZD/USD pair attracts some sellers following a modest Asian session uptick to the 0.5635-0.5640 region on Thursday, stalling the previous day's bounce from a two-week low, touched after the Reserve Bank of New Zealand (RBNZ) policy update. Spot prices currently trade around the 0.5620 area and seem vulnerable amid a goodish pickup in US Dollar (USD) demand.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, regains positive traction following Wednesday's post-FOMC corrective slide from a two-week high amid a combination of supporting factors. US Federal Reserve (Fed) Chair Kevin Warsh told reporters that the central bank remains vigilant against persistent inflation and geopolitical risks. This comes on top of concerns about energy-driven price pressures and underpins prospects for further Fed tightening. According to the CME Group's FedWatch Tool, traders are pricing in around an 80% chance that the US central bank will raise borrowing costs again in December. This, along with fears about a further escalation of tensions in the Middle East, acts as a tailwind for the safe-haven buck.

In the latest developments, The Wall Street Journal reported on Tuesday that US officials have told several Gulf Arab countries to prepare for a short and intense military campaign against Iran after the November 3 midterm elections. Iranian Foreign Minister Abbas Araghchi said that armed forces stand ready to defend the country even as Tehran will keep in close contact with intermediaries to give diplomacy a chance. Adding to this, furious fighting between the Iran-backed Houthis and the Saudi Arabia-backed government in Yemen keeps the geopolitical risk premium in play, supporting the USD. Meanwhile, the New Zealand Dollar (NZD) is weighed down by the RBNZ's surprise on-hold interest rate decision, which contributes to capping the NZD/USD pair.

USD bulls, however, seem hesitant and opt to wait for more cues about the Fed's policy path before placing fresh bets. Hence, the focus will remain glued to US economic releases – the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index. The crucial data will play a key role in influencing USD price dynamics. That said, the aforementioned fundamental backdrop favors USD bulls, which, along with the Fed-RBNZ divergence, suggests that the path of least resistance for the NZD/USD pair remains to the downside.