- NZD/USD rebounds ahead of US Consumer Price Index (CPI) data scheduled for Thursday.
- US core CPI is expected to remain stable at 3.4% year-on-year in June.
- The New Zealand dollar could limit its upside due to the subdued sentiment surrounding the RBNZ.
NZD/USD is recovering its recent losses, trading around 0.6090 during the European session on Thursday. Traders are looking forward to the release of the upcoming US Consumer Price Index (CPI) data for June, scheduled for Thursday, for further clarity on the direction of the Federal Reserve’s (Fed) monetary policy.
Market forecasts generally predict that the annualized US core CPI for the year ending in June will remain stable at 3.4%. Meanwhile, headline CPI inflation is expected to rise to 0.1% month-on-month in June, compared with the previous flat reading of 0.0%.
Meanwhile, on Wednesday, Federal Reserve (Fed) Chairman Jerome Powell stressed the importance of closely monitoring the labor market, highlighting its significant deterioration. In addition, Powell expressed confidence in the downward trend of inflation, following his comments on Tuesday emphasizing the need for more data to strengthen confidence in the inflation outlook.
The New Zealand Dollar (NZD) faced pressure following the Reserve Bank of New Zealand’s (RBNZ) dovish monetary policy statement. The central bank kept its cash rate steady at 5.5% on Wednesday as expected, but hinted at possible rate cuts in August if inflation eases as anticipated.
Francesco Pesole, FX strategist at ING, noted: “The Bank showed increased confidence in disinflation in the statement, noting that ‘tight monetary policy has significantly reduced consumer price inflation.'”
Economic indicator
CPI ex food and energy (YoY)
The CPI is published on US Labor Department and measures price movements by comparing retail prices of a representative basket of goods and services. The purchasing power of the dollar is diminished by inflation. The CPI is a key indicator for measuring inflation and purchasing trends. Products with high price volatility, such as energy and food, are excluded to capture a more accurate estimate of inflation. A reading above expectations is bullish for the dollar, while a reading below expectations is bearish.
Next post:
Thu Jul 11, 2024 12:30 PM
Frequency:
Monthly
Dear:
3.4%
Previous:
3.4%
Fountain:
US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to this mandate, inflation should be around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures continue to rise amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
