New Zealand Dollar dips, but RBNZ hike bets provide safety net
NZD/USD retreats to around 0.5940 on Wednesday at the time of writing, down 0.60% on the day. The New Zealand Dollar (NZD) loses ground against the US Dollar (USD), which finds some support following the release of the latest United States (US) inflation data.
The New Zealand Dollar (NZD) experienced a slight decline to 0.5940 against the US Dollar (USD) on Wednesday, marking a 0.60% decrease for the day. The US Dollar gained support from US inflation data, which showed the Personal Consumption Expenditures (PCE) Price Index rising 3.7% year-over-year (YoY) in July, unchanged from the previous month but slightly above the 3.6% forecast.
The core PCE Price Index, excluding volatile food and energy components, remained steady at 3.3% YoY. Investors closely monitored the data for clues about the Federal Reserve's (Fed) potential interest rate hike, with the CME FedWatch tool estimating a 36% probability of a rate increase at the Fed's next meeting. Meanwhile, New Zealand's Reserve Bank of New Zealand (RBNZ) was anticipated to raise interest rates by 25 basis points, bringing borrowing costs to 3%.
This divergence between the RBNZ's tightening outlook and the Fed's uncertain future could limit the downside pressure on the NZD as the USD benefited from the somewhat firmer-than-expected inflation data. Technical analysis indicated that NZD/USD was trading below its 100-period simple moving average (SMA), near 32 on the Relative Strength Index (RSI), suggesting potential for further downside but also the possibility of a rebound if sellers fail to drive a clean break lower.
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