The NZD/USD pair shows a positive trend, approaching the 0.5680 level during the early hours of Friday’s Asian session. This surge is occurring against a backdrop of a weakening US Dollar, which has been influenced by declining US Treasury yields, even as fears of a global trade war continue to loom.
In January, the US Producer Price Index (PPI) rose more than anticipated, which has led to a shift in expectations regarding the US Federal Reserve’s interest rate policy. Market participants have adjusted their forecasts, delaying any potential rate cuts to September, in contrast to previous expectations of a June reduction. This cautious optimism is based on resilient domestic demand and a robust labor market, suggesting that a rate cut from the Fed in the near term is unlikely.
The Reserve Bank of New Zealand (RBNZ) is set to make a significant policy move, expected to announce a cut to its Official Cash Rate (OCR) by 50 basis points, reducing it to 3.75% in its upcoming meeting. This anticipated action is supported by the findings from the latest Q1 inflation expectations survey, which indicates that firms see inflation expectations stabilizing closer to the 2% target across various time frames. As a result, the RBNZ’s dovish stance could place additional downward pressure on the New Zealand dollar against its US counterpart.
Looking ahead, the focus will also be on the US Retail Sales data being released later today, which could further influence market sentiment and trading dynamics. The combination of these economic indicators is likely to shape the direction of the NZD/USD pair in the near term.
