The NZD/USD pair continues its upward momentum, trading near 0.6260 during the early European session on Friday. The pair is on track to mark its fifth consecutive week of gains, driven by increasing speculation that the Federal Reserve (Fed) will initiate monetary policy easing in September. Market attention is focused on the release of the US Personal Consumption Expenditure (PCE) inflation data later today.
Economic Data and Fed Expectations
The Bureau of Economic Analysis (BEA) reported on Thursday that the US economy grew at an annualized rate of 3.0% for the second quarter (Q2), revising the initial estimate of 2.8%. This growth rate exceeded expectations. Additionally, initial jobless claims for the week ending August 24 fell to 231,000 from the previous week’s 233,000, coming in below the anticipated 232,000.
While the robust US economic data provides some support for the Greenback, gains appear limited as traders anticipate a potential rate cut by the Fed next month. According to the CME FedWatch Tool, the rate futures markets currently price in a 66% chance of a 25 basis point rate reduction in September, with the probability of a deeper 50 basis point cut decreasing to 34% from 36.5% before the GDP data release.
Upcoming US Inflation Data
Investors are keenly awaiting the US PCE inflation data due later on Friday. Any indication of higher inflation could challenge the prospects for a September rate cut, potentially bolstering the USD and capping the NZD/USD pair’s gains. Atlanta Fed President Raphael Bostic highlighted on Thursday that inflation remains a concern and suggested the Fed should await further employment and inflation reports before making any rate adjustments.
New Zealand Data Boosts NZD
On the New Zealand front, the recent ANZ Business Outlook survey has provided a boost to the New Zealand Dollar (NZD). The survey showed business confidence reaching its highest level in a decade, with the headline measure climbing to 51.0 in August and the expected own activity measure surging to a seven-year high of 37.0. This positive data has contributed to the Kiwi’s strength against the US Dollar.
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