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11/07/24
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NZD Higher After Soft US Inflation
On Thursday, the New Zealand dollar managed to post strong gains, and NZD/USD traded at about 0.6102, up 0.34% for the day in the North American session. NZD/USD rose by 0.90% earlier before retracting.
June inflation in the US fell to 3.0% y/y, down from May’s 3.3% and lower than the 3.1% market estimate. That was the lowest inflation print since June 2023. CPI declined by 0.1% monthly, down from 0 in May and lower than the 0.1% market estimate. This was the first deflationary reading since May 2020.
Core CPI also declined in June. Core CPI dropped to 3.3% y/y, down from May’s 3.4% and lower than the 3.4% market estimate. Core CPI dropped to 0.1% from 0.2% monthly, lower than the 0.2% market estimate.
The unexpected drop in CPI has weakened the US dollar versus most of the majors and according to CME’s FedWatch tool expectations for a September rate cut have increased to 86%, versus 69% a day ago.
The Fed has remained cautious about rate hikes and Fed Chair Powell this week remained coy about rate cut timing in testimony to US lawmakers. The Fed may be a bit more dovish after the soft inflation report.
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