NZD/USD gathers strength above 0.6000 on softer US CPI data

• NZD/USD edges higher to around 0.6035 in Thursday’s early European session, bolstered by the softer US Dollar.  

• Softer US inflation data undermines the US dollar and acts as a headwind for the pair. 

• Trump said the trade deal with China is ‘done,’ though details from China were lacking.

The NZD/USD pair gathers strength to around 0.6035 during the early Asian session on Thursday. Cooler-than-expected US inflation data and rising bets of a Federal Reserve (Fed) rate cut in September exert some selling pressure on the Greenback. The US Producer Price Index (PPI) and weekly Initial Jobless Claims will be the highlights later on Thursday. 

US inflation rose in May by less than expected for the fourth consecutive month, weighing on the US Dollar (USD). The US CPI rose 2.4% YoY in May versus 2.3% prior, the US Bureau of Labor Statistics (BLS) showed on Wednesday. This reading came in below the market expectation of 2.5%. The core CPI, which excludes volatile food and energy prices, climbed 2.8% YoY in May, compared to the consensus of 2.9%. 

Cooler-than-expected US inflation in May has prompted traders to raise their bets on a Federal Reserve (Fed) rate cut. Traders of short-term interest rate futures have priced in nearly a 68% odds that the Fed would cut rates by 25 basis points (bps) by September, compared with 57% before the US CPI data. They now also see a still small but rising chance of an earlier rate cut, putting about an 18% odds of that happening in July versus about 13% earlier on Wednesday.

US President Donald Trump said that the trade deal with China is ‘done,’ although details and confirmation from China were lacking. Additionally, US Commerce Secretary Howard Lutnick stated that tariffs on China will be at the current 55% without additional increases. Positive developments surrounding US-China trade talks also underpin the China-proxy Kiwi, as China is a major trading partner of New Zealand.