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Fed Chair Jerome Powell failed to inject excitement into the FX market, leaving most currencies as lively as a snoozing cat. Despite the calm, the appeal of carry trades persists in this low-volatility environment, explaining why the Japanese yen (JPY) has lost ground today even though everyone and their grandmother still expects US rate cuts. There’s some interest in selling USD/JPY above 161.50, thanks to the whispers about GPIF repatriation. At the very least, these rumors could cap any significant upside moves over the short term.

Powell is set to speak to the House later today, but his comments are expected to be rerun from the previous day. So, Thursday’s US Consumer Price Index (CPI) is the real contender that might shake the forex trees and inject some life into the markets.

Aside from potential Powell headlines, there are no major macro events in the US today. The US Democratic Party's revolt against President Joe Biden seems to have been entirely sidelined by risk markets. The PredictIt index of Biden’s probability of being the party's candidate in November has bounced back from 40% to 60%, suggesting that the internal maneuvering to replace him might be a lot of hot air.

The New Zealand dollar (NZD) has taken the spotlight in the FX market today, weakening against both the US dollar (USD) and the Australian dollar (AUD). This has nudged NZD/USD closer to the 0.6000 support level, while AUD/NZD has climbed towards the 1.1100 level. The culprit? The Reserve Bank of New Zealand’s (RBNZ) latest policy update revealed a softening in their policy guidance.

The smart move here is eyeing the potential policy divergence between the RBNZ and the Reserve Bank of Australia (RBA), which could push AUD/NZD higher or keep the pair bid on dips.

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