During the Asian trading session on Thursday, the NZD/USD pair showed signs of strengthening around 0.6108, propelled by positive developments surrounding the New Zealand Dollar (NZD). The currency saw upward movement following the Reserve Bank of New Zealand’s (RBNZ) decision to maintain interest rates unchanged and signal potential delays in rate cuts amidst persistent inflationary pressures.
At its May meeting on Wednesday, the RBNZ opted to keep the policy rate steady at 5.50%, marking the seventh consecutive meeting without a change. In its statement, the central bank acknowledged a favorable decrease in inflation, partly attributed to lower inflation levels for imported goods and services. However, the RBNZ highlighted the gradual decline in service inflation and the postponement of anticipated policy interest rate adjustments. Furthermore, the RBNZ expressed its anticipation for inflation to alleviate within its targeted range by the conclusion of 2024. The hawkish stance adopted by the New Zealand central bank offered support to the Kiwi and provided a favorable environment for the NZD/USD pair.
On the other hand, the USD’s performance was influenced by the release of the Federal Reserve’s (Fed) minutes from the April 30-May 1 policy meeting. The minutes indicated concerns regarding the lack of significant progress toward the Fed’s 2 percent inflation objective in recent months. Investors continued to recalibrate their expectations for potential rate cuts throughout the year, with the CME FedWatch tool reflecting nearly 60% odds of the first reduction occurring in September. Attention now turns to the preliminary reading of the US Purchasing Managers Index (PMI) for May. A stronger-than-expected reading could bolster the Greenback and limit the NZD/USD pair’s upside potential in the short term.
