- NZD/USD drops to 0.6070 as US Dollar gains firm ground.
- Investors expect the Fed to begin cutting interest rates in September.
- A bigger-than-expected drop in New Zealand inflation has raised hopes of early rate cuts by the RBNZ.
The NZD/USD pair is down near 0.6070 in the American session on Thursday. The New Zealand asset is falling while the US Dollar Index (DXY) is gaining ground after falling to a near fresh four-month low near 103.70.
Meanwhile, the short-term outlook for the US Dollar (USD) remains uncertain as the Federal Reserve (Fed) is widely anticipated to begin cutting interest rates as early as its September meeting.
Following a slower-than-expected U.S. Consumer Price Index (CPI) report for June, Fed policymakers have gained some confidence that interest rates will become justified in the near term. On Wednesday, Richmond Fed President Thomas Barkin cited the widening disinflation as “very encouraging.” Barkin added that he is confident policymakers will debate at the July policy meeting whether it is still appropriate to describe inflation as elevated, Reuters reported.
Meanwhile, growing speculation about early rate cuts by the Reserve Bank of New Zealand (RBNZ) has weighed on the New Zealand Dollar (NZD). Expectations of early rate cuts by the RBNZ are rising as price pressures in the New Zealand (NZ) economy slowed at a faster pace in the second quarter of this year.
NZ quarterly inflation rose 0.4%, slower than expected and the first quarter reading of 0.6%. The annual CPI data slowed to a robust pace of 3.3% from the consensus of 3.5% and the previous release of 4.0%.
NZD/USD is oscillating within the trading range on Wednesday. Earlier, the asset is finding temporary support near the 50% Fibonacci retracement level (drawn from the April 19 low near 0.5850 to June 12 high at 0.6222) at 0.6035 on a daily time frame. The near-term outlook remains bearish as the 20-day exponential moving average (EMA) near 0.6100 is acting as a major barrier for NZD bulls.
The 14-period Relative Strength Index (RSI) is fluctuating in the range of 40.00-60.00, suggesting indecision among market participants.
A fresh bullish momentum would appear if the asset breaks above the July 3 high at 0.6130 for targets near the May 28 high around 0.6170 and the June 12 high of 0.6222.
However, a downside break below the April 4 high around 0.6050 would expose the asset to the psychological support of 0.6000.
NZD/USD Daily Chart
Economic indicator
Consumer Price Index (QoQ)
This report, published by Statistics New ZealandThe CPI is a measure of inflation movement based on a comparison of retail prices in a representative consumer basket of goods and services over certain time periods. The purchasing power of the New Zealand dollar is eroded by inflation. The CPI is an indicator of inflationary pressure and can lead to changes in purchasing trends. A high reading is perceived as positive for the dollar, while a lower than expected reading is negative and bearish for the currency.
Latest Post:
Tue Jul 16, 2024 22:45
Frequency:
Quarterly
Current:
0.4%
Dear:
0.6%
Previous:
0.6%
Fountain:
Stats NZ
With the Reserve Bank of New Zealand (RBNZ) inflation target hovering around the 2% midpoint, Statistics New Zealand’s quarterly release of the Consumer Price Index (CPI) is of great importance. The trend in consumer prices tends to influence the RBNZ’s interest rate decision, which in turn strongly impacts the valuation of the NZD. Acceleration in inflation could lead to faster rate tightening by the Reserve Bank of New Zealand and vice versa. Actual figures exceeding forecasts make the NZD bullish.
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.
