During the early European session on Thursday, the NZD/USD pair maintained its upward momentum, hovering around 0.5930 for the second consecutive day. The ongoing appreciation of the New Zealand Dollar (NZD) against the US Dollar (USD) is primarily attributed to the weakening of the latter, supported by an enhanced risk sentiment prevailing in the market.
A pivotal factor driving the NZD/USD pair’s ascent was Wednesday’s release of New Zealand’s Consumer Price Index (CPI) data, revealing a nearly 3-year low at 4% year-over-year for the first quarter. This development has provided the Reserve Bank of New Zealand (RBNZ) with increased flexibility to consider potential interest rate cuts. Despite acknowledging persistent inflation in certain sectors, the RBNZ opted to maintain interest rates at 5.5% during its recent policy meeting.
Conversely, Federal Reserve Bank of Cleveland President Loretta Mester acknowledged on Wednesday that inflation has surpassed expectations. Mester emphasized the necessity for the Federal Reserve (Fed) to gather further evidence before confirming the sustainability of achieving the 2% inflation target, as reported by Reuters.
Moreover, Fed Chair Jerome Powell’s comments on Tuesday hinted at limited progress in inflation this year, signaling a cautious approach towards reaching the 2% target. This rhetoric suggests a potentially hawkish sentiment surrounding the Fed’s upcoming policy decisions, which could bolster the US Dollar and consequently impede the NZD/USD pair’s advance.
Traders are closely monitoring the release of key economic indicators from the United States (US) on Thursday, including weekly Initial Jobless Claims and Existing Home Sales. These data points are anticipated to offer valuable insights into the state of the US economy, potentially influencing the trajectory of the Greenback in the near term.
