- NZD/USD recovers some intraday losses as the US Dollar remains under pressure on strong Fed rate cut bets.
- Fed’s Powell acknowledged the need for more soft inflation data before pivoting toward policy normalization.
- New Zealand’s second-quarter inflation is estimated to have risen steadily by 0.6%.
The NZD/USD pair bounces back strongly after finding buying support near the two-month low around 0.6050 in Tuesday’s European session. The Kiwi asset recovers as the US Dollar (USD) remains on the defensive due to firm expectations that the Federal Reserve (Fed) will start cutting its key interest rates from the September meeting.
The Dollar Index (DXY), which tracks the value of the greenback against six major currencies, is struggling to hold its immediate support of 104.00. Meanwhile, investors’ heightened risk appetite due to rising prospects of Fed rate cuts has supported risk-sensitive assets. S&P 500 futures have posted some losses in European trading hours.
Signs of improving confidence among Fed officials in the progress of disinflation have raised expectations for Fed rate cuts in September. Fed Chairman Jerome Powell said in his speech at the Economic Club of Washington on Monday, “We’ve had three better readings, and if you average them out, that’s a good place,” Reuters reported.
For her part, San Francisco Federal Reserve Bank President Mary Daly said “confidence is growing” that inflation is heading toward the 2% target. However, she declined to provide guidance on the time frame for rate cuts.
On the economic front, investors are awaiting the US retail sales data for June, due at 12:30 GMT. The report is expected to show that monthly retail sales remained stagnant after a meager 0.1% growth in May.
In the New Zealand region, investors are awaiting the second quarter Consumer Price Index (CPI), which will provide clues as to when the Reserve Bank of New Zealand (RBNZ) will begin to cut interest rates. New Zealand inflation is estimated to have grown at a steady pace of 0.6%. On an annualized basis, price pressures are expected to have slowed to 3.5% from the previous release of 4.0%.
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.
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.
