The New Zealand Dollar (NZD) traded 0.13% higher at approximately 0.5860 against the US Dollar (USD) during the European trading session on Wednesday, although it remained within Tuesday's trading range [1]. This movement was attributed to the US Dollar's underperformance, despite ongoing expectations for a Federal Reserve (Fed) interest rate hike. At the time of reporting, the US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, was down 0.2% at around 98.65 [1]. The US Dollar was notably weakest against the Japanese Yen, falling 0.51% [1]. According to the CME FedWatch tool, the probability of the Fed raising interest rates at its policy meeting next week stood at 60% [1].
Investors are closely watching for the United States Consumer Price Index (CPI) data for August, scheduled for release on Friday [1]. Economists at TD Securities expect the upcoming US CPI report to indicate that underlying inflation remained under control in August, with the core CPI projected to rise 0.19% month-over-month [1]. The services segment is anticipated to be the main driver of inflation, while core goods prices are likely to have declined modestly month-over-month [1]. On an annual basis, TD Securities forecasts that core CPI increased 2.3% year-over-year, a decrease of 10 basis points compared to July, while headline inflation is expected to remain unchanged at 3.4% year-over-year [1]. The bank notes that risks to their forecasts are skewed to the upside, given assumptions of significant price declines in tariff-exposed goods categories [1].
From a technical perspective, NZD/USD trades at 0.5860 and maintains a mildly bearish near-term bias, as it sits below the 20-day exponential moving average [1].
CONCLUSION
The NZD/USD pair has seen a modest rise amid US Dollar weakness and anticipation of key US CPI data. Market participants are awaiting inflation figures and the Fed's policy decision, with a 60% probability of a rate hike next week. The outlook remains cautious, with technical indicators suggesting a mildly bearish bias for NZD/USD.