The NZD/USD pair is seeing a slight decline as traders show preference for the US Dollar ahead of the Federal Reserve’s interest rate decision and the release of US inflation data for May. The pair is hovering near 0.6140 during the European trading hours.
It is widely anticipated that the Federal Reserve will keep the policy rate unchanged in June, aiming to bring inflation down to its 2% target. The strong US labor market conditions have reduced the likelihood of a Fed rate cut in September, with the probability now standing at 52%, as per the CME FedWatch Tool.
Investors are keeping a close eye on the upcoming US inflation figures for May, with projections indicating year-over-year increases of 3.4% for the headline CPI and 3.5% for the core CPI.
In New Zealand, consumer inflation remained steady in May while producer price deflation in China, a key trading partner, has eased. This suggests a possible need for additional stimulus to drive demand. Despite economic challenges, the high interest rates in New Zealand are providing support for the NZD, with the Reserve Bank of New Zealand expected to maintain its current policy stance until at least mid-2025.