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New Zealand Dollar declines amid strong US inflation as focus shifts to RBNZ outlook

  • The New Zealand Dollar weakens as stronger-than-expected US inflation data reinforces expectations of a restrictive Fed policy.
  • US inflation accelerated to 3.8% YoY in April, above market expectations.
  • Investors now focus on the Reserve Bank of New Zealand inflation expectations report due on Wednesday.

NZD/USD trades around 0.5940 on Tuesday at the time of writing, down 0.41% on the day, pressured by stronger-than-expected inflation data from the United States (US). The rebound in the US Dollar (USD) is weighing on the pair as markets scale back expectations for Federal Reserve (Fed) monetary easing.

The Bureau of Labor Statistics (BLS) reported that inflation, as measured by the Consumer Price Index (CPI), accelerated to 3.8% YoY in April from 3.3% previously, above market expectations of 3.7%. On a monthly basis, the CPI rose 0.6%, in line with forecasts. Core inflation, which excludes volatile food and energy prices, increased to 2.8% YoY from 2.6% previously, also exceeding the 2.7% consensus.

The report also noted that energy prices rose 3.8% in April, accounting for more than 40% of the monthly increase in the overall index. Shelter and food costs also continued to rise, reinforcing concerns about persistent inflationary pressures in the United States.

Meanwhile, weekly ADP data showed that US private employers added an average of 33K jobs per week over the four weeks ending April 25, signaling a modest improvement in labor market momentum.

Following the release, the US Dollar Index (DXY) advanced toward 98.40, while US Treasury yields also moved higher. Investors now assess that the Fed may need to keep interest rates elevated for longer in order to contain inflationary pressures. According to the CME FedWatch tool, the chance of a rate hike by the December meeting increased to 30.3% after the CPI release, up from 21.5% the previous day.

The US Dollar is also benefiting from safe-haven demand. Geopolitical tensions in the Middle East remain elevated after US President Donald Trump stated that the US-Iran ceasefire was “on massive life support,” reviving concerns over a possible resumption of military operations.

On the New Zealand side, expectations that the Reserve Bank of New Zealand (RBNZ) may maintain a cautious stance or even consider further tightening to bring inflation back toward the 2% midpoint could help limit NZD/USD losses. Markets are now awaiting the RBNZ’s Q2 inflation expectations report, scheduled for release on Wednesday.

New Zealand Dollar Price Today

The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the British Pound.

USDEURGBPJPYCADAUDNZDCHF
USD0.44%0.63%0.30%0.25%0.41%0.36%0.48%
EUR-0.44%0.18%-0.11%-0.22%-0.04%-0.10%0.06%
GBP-0.63%-0.18%-0.32%-0.39%-0.23%-0.28%-0.13%
JPY-0.30%0.11%0.32%-0.08%0.09%0.04%0.17%
CAD-0.25%0.22%0.39%0.08%0.16%0.12%0.25%
AUD-0.41%0.04%0.23%-0.09%-0.16%-0.04%0.08%
NZD-0.36%0.10%0.28%-0.04%-0.12%0.04%0.13%
CHF-0.48%-0.06%0.13%-0.17%-0.25%-0.08%-0.13%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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