NZD/USD weakens below 0.6050 on renewed US Dollar demand, eyes on US CPI data
NZD/USD softens to near 0.6030 in Wednesday’s early European session.
The US and China agreed on a framework to implement their trade truce.
The RBNZ might slow the pace of rate cuts as uncertainty grows.
The NZD/USD pair attracts some sellers to around 0.6030 during the early European session on Wednesday, bolstered by renewed US Dollar (USD) demand. Investors assess the result of trade talks between the United States and China ahead of the US May Consumer Price Index (CPI) inflation data, which will be released later on Wednesday.
The Greenback edges higher after the report early Wednesday that the US and China agreed to a preliminary deal on how to implement the consensus the two sides reached in Geneva. US negotiators stated that they “absolutely expect” that issues around shipments of rare earth minerals and magnets will be resolved with the framework implementation, even though the full details of their agreement weren’t immediately available. Analysts expect a potential trade deal between the world's two biggest economies could boost the USD broadly.
Meanwhile, Wednesday’s US inflation data is expected to show US consumers probably saw slightly faster inflation in May. The headline CPI is forecast to see an increase of 2.5% YoY in May, while the core CPI is projected to see a rise of 2.9% YoY in the same period.
If the report showed hotter inflation in the US, this may reinforce the Federal Reserve’s (Fed) wait-and-see stance as it assesses the impact of tariffs, with traders increasingly betting that the US central bank will cut interest rates just once this year. This, in turn, might underpin the Greenback and create a headwind for the pair in the near term.
On the other hand, the rising expectation that the Reserve Bank of New Zealand (RBNZ) will slow the pace of interest rate cuts might help limit the NZD’s losses. “While the RBNZ downgraded its economic forecasts compared to February and emphasized the high degree of uncertainty around global conditions, there was a surprising amount of caution around the timing and extent of further OCR cuts,” said Westpac senior economist Michael Gordon.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
