NZD Falls Amid US Inflation Data, RBNZ Hike Bets Provide Support
The New Zealand Dollar (NZD) fell against the US Dollar (USD) on Wednesday, dropping 0.60% to around 0.5940. This decline came as the USD found some support following the release of US inflation data.
According to the Bureau of Economic Analysis (BEA), the Personal Consumption Expenditures (PCE) Price Index rose 3.7% year-over-year in July, slightly above the 3.6% expected by markets. The core PCE Price Index, which excludes volatile food and energy components, remained steady at 3.3% year-over-year.
The slight upside surprise in headline inflation provided some support to the Greenback, but the reaction was limited as the core measure delivered no surprise and the report did not significantly alter expectations for the September meeting. Markets price in around a 36% chance of an interest-rate hike at the Federal Reserve's (Fed) next meeting.
The Reserve Bank of New Zealand (RBNZ) is expected to raise interest rates by 25 basis points at its monetary policy meeting next week, which could limit downside pressure on the New Zealand Dollar. The divergence between a tightening RBNZ and a more uncertain Fed provides some support to the Kiwi.