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NZ dollar jumps to one-month high after softer US CPI
US CPI fell 0.4% month over month in June and annual inflation eased to 3.5%, pushing down odds for an imminent Fed hike.
The New Zealand dollar surged to a one-month high on Tuesday as traders digested softer-than-expected US inflation data that reduced expectations for an early Federal Reserve rate hike. NZD/USD was quoted around 0.5820, up nearly 1.23% on the day, with the move coming alongside renewed US dollar selling pressure.
US Consumer Price Index (CPI) inflation fell 0.4% month over month in June, after a 0.5% rise in May, and the print was below forecasts for a 0.1% decline. Annual inflation eased to 3.5% from 4.2%, while core CPI was flat on a monthly basis, missing expectations for a 0.2% increase, and annual core inflation slowed to 2.6% from 2.9%.
The softer data shifted rate expectations, according to the CME FedWatch Tool, which showed the probability of a July hike falling to 12% from 40% before the CPI release. The odds of a September increase also eased to 59% from 74%, while the US Dollar Index (DXY) was around 100.75, retreating from an intraday high of 101.32.
The report also pointed to a contrast between the Reserve Bank of New Zealand’s hawkish stance and easing Fed hike expectations, supporting the Kiwi’s relative outperformance. It noted attention is turning to Fed Chair Kevin Warsh’s congressional testimony later in the session, where prepared remarks highlighted the Fed’s focus on persistently elevated inflation and described the labor market as broadly stable.
Latest closeDollar index 101.28 ▲0.3%