NZD/USD rises toward 0.5950 amid subdued US Dollar, risk-on mood

• NZD/USD extends gains as the US Dollar faces challenges on subdued Treasury yields.
• The latest inflation data from New Zealand offers the RBNZ greater flexibility to consider interest rate cuts.
• Fed’s Mester acknowledged that the central bank needs additional assurance before confirming the sustainability of 2% inflation.

NZD/USD continues to gain ground for the second consecutive day, hovering around 0.5930 during the early European session on Thursday. The decline in the US Dollar (USD) contributes support for the NZD/USD pair, which could be attributed to the improved risk sentiment.

On Wednesday, the report indicated that New Zealand's Consumer Price Index (CPI) has hit a nearly 3-year low, registering at 4% year-over-year in the first quarter. This situation provides the Reserve Bank of New Zealand (RBNZ) with more flexibility to contemplate interest rate cuts. Despite acknowledging persistent inflation in specific sectors, the RBNZ opted to maintain interest rates at 5.5% during its policy meeting last week.

On the other side, Federal Reserve Bank of Cleveland President Loretta Mester acknowledged on Wednesday that inflation has exceeded expectations. Mester stressed that the Fed requires further assurance before confirming the sustainability of 2% inflation, as per a Reuters report.

In addition, US Federal Reserve (Fed) Chair Jerome Powell commented on Tuesday that recent data indicates limited progress in inflation this year, suggesting an extended period before reaching the 2% target. This statement potentially signals a hawkish sentiment surrounding the Fed’s upcoming policy decision, which could provide support for the US Dollar, consequently, limiting the advance of the NZD/USD pair.

On the data side, traders await the release of weekly Initial Jobless Claims and Existing Home Sales from the United States (US) on Thursday, which could provide further insight into the state of the US economy and potentially impact the direction of the Greenback.