The NZD/USD pair is trading lower near 0.6130 in Tuesday’s early Asian session. The rebound of the USD Index above 105.00 is dragging the pair down. Without any major economic data from New Zealand, the pair’s movement will be influenced by the USD. The upcoming US Consumer Price Index (CPI) inflation data and the Federal Reserve (Fed) monetary policy meeting on Wednesday will be key events to watch.
Inflation in the US has been high in the first quarter of this year, making it difficult for the Fed to cut interest rates. Even though CPI inflation eased in April, the Fed is waiting for more evidence before making a decision. If the May inflation report shows improvement, it could lead to a rate cut in the coming months, weakening the USD and potentially benefiting NZD/USD.
However, a strong employment report last week suggests that the Fed may take a more hawkish stance and delay rate-cut plans as inflation remains high. Analysts from MUFG believe that the Fed may stay on the sidelines for longer due to the strong jobs data.
On the other hand, the Reserve Bank of New Zealand (RBNZ) continues to maintain a hawkish stance, which could support the New Zealand Dollar against the USD. The RBNZ is expected to keep its current policy stance until at least mid-2025, allowing time for a thorough evaluation of data.