The New Zealand Dollar (NZD/USD) and Australian Dollar (AUD/USD) both showed signs of recovery during early European trading hours on Friday, with NZD/USD rising to around 0.5835 and AUD/USD up 0.22% at approximately 0.7175 [1][2]. This rebound comes after both pairs experienced declines, largely attributed to a stronger US Dollar following robust US Producer Price Index (PPI) data for August. The US PPI headline figure accelerated at a faster-than-expected pace to 5.3% year-on-year, while the core PPI rose by 4.6% as anticipated [2].
Market participants are now focused on the upcoming US Consumer Price Index (CPI) inflation data, scheduled for release later on Friday. The headline CPI is expected to show a 3.4% increase in August, with the core CPI projected at 2.4% [1][2]. This CPI report is considered the final major inflation indicator before the Federal Reserve's interest rate decision next week [1]. Following the strong PPI data, the probability of a US rate hike has risen to 70%, according to the CME FedWatch tool [1].
On the domestic front, the Reserve Bank of New Zealand (RBNZ) recently raised its Official Cash Rate (OCR) by 25 basis points to 2.75%, but maintained a dovish tone, emphasizing a gradual removal of monetary stimulus and signaling that the current rate remains accommodative [1]. Economists expect at least one more rate hike from the RBNZ before year-end, likely in December [1]. Meanwhile, the Reserve Bank of Australia (RBA) is also expected to raise interest rates again this year, following hawkish comments from Deputy Governor Andrew Hauser and analyst expectations of potential hikes in the coming months [2].
Technical analysis for NZD/USD indicates that the pair remains capped below the 100-day simple moving average (SMA) at 0.5842, with a bearish near-term bias and initial support at 0.5800 [1]. For AUD/USD, the pair holds a bullish tone above the 20-day exponential moving average (EMA) at 0.7159, with positive divergence in the Relative Strength Index (RSI) supporting further recovery. Immediate support is seen at 0.7160, with resistance near the four-year high at 0.7280 [2].
CONCLUSION
Both the New Zealand and Australian Dollars are rebounding ahead of the critical US CPI release, which is expected to shape near-term Fed policy expectations. While recent central bank actions in New Zealand and Australia suggest a cautious approach to further tightening, market sentiment remains sensitive to US inflation data and its implications for global monetary policy. The outcome of the US CPI report and subsequent Fed decision will likely drive the next major moves in these currency pairs.