NZD/USD trims gains below 0.6100 ahead of US PPI data
-
NZD/USD
trades
on
a
weaker
note
around
0.6090
in
Friday’s
early
Asian
session. -
Odds
of
Fed
rate
cuts
are
growing
after
the
softer-than-expected
June
US
CPI
inflation
report. -
The
RBNZ’s
dovish
monetary
policy
statement
undermines
the Kiwi against
the
USD.
The
NZD/USD
pair
trims
gains
near
0.6090
during
the
early
Asian
session
on
Friday.
The
pair
loses
traction
after
retreating
from
the
previous
session
high
of
nearly
0.6135.
Later
on
Friday,
investors
will
keep
an
eye
on
the
US
June
Producer
Price
Index
(PPI)
and
the
preliminary
Michigan
Consumer
Sentiment
gauge.
Data
released
by
the
US
Bureau
of
Labor
Statistics
(BLS)
on
Thursday
showed
that
the
US
Consumer
Price
Index
(CPI)
rose
3.0%
on
a
yearly
basis
in
June,
compared
to
a
rise
of
3.3%
in
May.
This
reading
came
in
below
the
market
consensus
of
3.1%.
Meanwhile,
the
annual
core
CPI,
which
excludes
volatile
food
and
energy
prices,
climbed
3.3%
YoY
in
June,
below
the
forecast
and
May’s
increase
of
3.4%.
On
a
monthly
basis,
the
CPI
declined
0.1%,
while
the
core
CPI
was
up
0.1%.
The
softer
US
inflation
data
has
triggered
the
expectation
that
the
US Federal
Reserve
(Fed)
would
lower
its
borrowing
costs
this
year,
which
might
weigh
on
the
US
Dollar
(USD)
in
the
near
term.
Investors
are
now
pricing
in
a
nearly
89%
chance
of
a
September
Fed
meeting
rate
cut,
from
73%
on
Wednesday
and
around
50%
a
week
ago,
according
to
CME
Group’s FedWatch
Tool.
On
the
other
hand,
a
less
hawkish
stance
of
the
Reserve
Bank
of
New
Zealand
(RBNZ)
is
likely
to
exert
some
selling
pressure
on
the
New
Zealand
Dollar
(NZD)
for
the
time
being.
The
central
bank
left
its
Official
Cash
Rate
(OCR)
unchanged
for
the
eighth
consecutive
meeting
at
5.5%
on
Wednesday,
as
expected but
hinted
at
possible
rate
cuts
in
August
if
inflation
decreases
as
expected.
New
Zealand
Dollar
FAQs
The
New
Zealand
Dollar
(NZD),
also
known
as
the
Kiwi,
is
a
well-known
traded
currency
among
investors.
Its
value
is
broadly
determined
by
the
health
of
the
New
Zealand
economy
and
the
country’s
central
bank
policy.
Still,
there
are
some
unique
particularities
that
also
can
make
NZD
move.
The
performance
of
the
Chinese
economy
tends
to
move
the
Kiwi
because
China
is
New
Zealand’s
biggest
trading
partner.
Bad
news
for
the
Chinese
economy
likely
means
less
New
Zealand
exports
to
the
country,
hitting
the
economy
and
thus
its
currency.
Another
factor
moving
NZD
is
dairy
prices
as
the
dairy
industry
is
New
Zealand’s
main
export.
High
dairy
prices
boost
export
income,
contributing
positively
to
the
economy
and
thus
to
the
NZD.
The
Reserve
Bank
of
New
Zealand
(RBNZ)
aims
to
achieve
and
maintain
an
inflation
rate
between
1%
and
3%
over
the
medium
term,
with
a
focus
to
keep
it
near
the
2%
mid-point.
To
this
end,
the
bank
sets
an
appropriate
level
of
interest
rates.
When
inflation
is
too
high,
the
RBNZ
will
increase
interest
rates
to
cool
the
economy,
but
the
move
will
also
make
bond
yields
higher,
increasing
investors’
appeal
to
invest
in
the
country
and
thus
boosting
NZD.
On
the
contrary,
lower
interest
rates
tend
to
weaken
NZD.
The
so-called
rate
differential,
or
how
rates
in
New
Zealand
are
or
are
expected
to
be
compared
to
the
ones
set
by
the
US
Federal
Reserve,
can
also
play
a
key
role
in
moving
the
NZD/USD
pair.
Macroeconomic
data
releases
in
New
Zealand
are
key
to
assess
the
state
of
the
economy
and
can
impact
the
New
Zealand
Dollar’s
(NZD)
valuation.
A
strong
economy,
based
on
high
economic
growth,
low
unemployment
and
high
confidence
is
good
for
NZD.
High
economic
growth
attracts
foreign
investment
and
may
encourage
the
Reserve
Bank
of
New
Zealand
to
increase
interest
rates,
if
this
economic
strength
comes
together
with
elevated
inflation.
Conversely,
if
economic
data
is
weak,
NZD
is
likely
to
depreciate.
The
New
Zealand
Dollar
(NZD)
tends
to
strengthen
during
risk-on
periods,
or
when
investors
perceive
that
broader
market
risks
are
low
and
are
optimistic
about
growth.
This
tends
to
lead
to
a
more
favorable
outlook
for
commodities
and
so-called
‘commodity
currencies’
such
as
the
Kiwi.
Conversely,
NZD
tends
to
weaken
at
times
of
market
turbulence
or
economic
uncertainty
as
investors
tend
to
sell
higher-risk
assets
and
flee
to
the
more-stable
safe
havens.
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