New Zealand Dollar gathers strength above 0.5800, all eyes on US CPI inflation data
The NZD/USD pair rises to around 0.5835, snapping the four-day losing streak during the early European trading hours on Friday. However, the potential upside for the pair might be limited as markets turn cautious ahead of the key US Consumer Price Index (CPI) inflation data later on Friday.
The New Zealand Dollar (NZD) experienced a rise above 0.5800 during early European trading hours on Friday, marking the end of a four-day decline. However, potential upside may be limited, as markets become more cautious before the US Consumer Price Index (CPI) inflation data is released later in the day. The probability of a US rate increase stands at 70%, according to the CME FedWatch tool, based on a report showing an increase in Producer Price Index (PPI) in August.
The Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate (OCR) by 25 basis points to 2.75%, but the cautious tone and forward guidance have dampened expectations for further aggressive tightening. Economists anticipate at least one more rate hike before the year's end. The NZD's performance is influenced by factors such as China's economic health and dairy prices, which are major exports.
The RBNZ aims to maintain an inflation rate between 1% and 3% over the medium term, with a target near 2%. The NZD typically strengthens during risk-on periods and weakens during market turbulence or economic uncertainty.
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