New Zealand Dollar declines to near 0.5950 as US PCE data lift Fed rate hike bets

The New Zealand Dollar (NZD) slipped to around 0.5950 against the US Dollar (USD) on Thursday, as stronger US inflation data heightened expectations of a Federal Reserve (Fed) rate increase. On Wednesday, the US Personal Consumption Expenditures (PCE) Price Index increased by 3.7% over the past year, unchanging from June but slightly surpassing the 3.6% forecast.

Despite a modest monthly rise of 0.2%, the core PCE inflation remained steady at 3.3% year-over-year. This inflationary data kept the market anticipating a Fed rate hike by year-end, with a 38% probability of a 25 basis points hike in September according to the CME FedWatch tool. Traders are eagerly awaiting Fed Chairman Kevin Warsh's speech at the upcoming Jackson Hole Symposium on Friday, which could shed light on the trajectory of US interest rates.

Following the data release, attention is shifting to the Reserve Bank of New Zealand's (RBNZ) policy meeting scheduled for September 2, where a potential 25 basis points rate increase is widely anticipated. Analysts note that the NZD's performance is influenced by several factors, including China's economic performance, dairy prices, and macroeconomic indicators.