As the US Dollar (USD) continues to recover, the NZD/USD pair faces selling pressure near 0.6250 in Wednesday’s North American session. The US Dollar Index (DXY) has extended its recovery above 101.00 from its year-to-date low of 100.50, leading to a decline in the Kiwi asset.
The uncertainty among market participants is further fueled by the upcoming release of the US core Personal Consumption Expenditure inflation (PCE) data for July. This has also impacted risk-sensitive assets in the market.
Investors are eagerly awaiting the US PCE inflation data to gain insights into the Federal Reserve’s interest rate cut path. Market expectations are currently leaning towards a rate cut in September, with uncertainty over the potential size of the cut.
The US PCE report is expected to show that annual core inflation accelerated to 2.7% in July from 2.6% in June, with monthly figures increasing steadily by 0.2%.
Despite the US Dollar’s strength against the New Zealand Dollar (NZD), the Kiwi’s performance against other major currencies remains firm. Market participants anticipate more interest rate cuts from the Reserve Bank of New Zealand (RBNZ) this year, following the bank’s unexpected pivot to policy normalization two weeks ago.
Analysis:
The US Dollar’s recovery has led to a decline in the NZD/USD pair, with the Kiwi asset facing selling pressure near 0.6250. The upcoming US PCE inflation data is expected to provide insights into the Federal Reserve’s interest rate cut path, impacting market expectations. Despite the RBNZ’s potential interest rate cuts, the Kiwi’s performance against other major currencies remains strong.