NZD/USD Capped Ahead of US CPI Release Amid Rising Rate Hike Bets
The New Zealand Dollar (NZD) has recovered from its six-week low against the US Dollar (USD), but the upside potential appears limited ahead of the crucial US Consumer Price Index (CPI) release. The NZD/USD pair gained positive traction during the Asian session on Friday, reversing some of the previous day's heavy losses to sub-0.5800 levels.
The US CPI will be closely watched for more cues about the US Federal Reserve's (Fed) policy path amid rising rate hike bets, bolstered by the upbeat US Nonfarm Payrolls (NFP) report and still sticky inflation. The data released on Thursday showed that the US Producer Price Index (PPI) accelerated to a 5.4% YoY rate in August, beating consensus estimates.
This prompted traders to add to bets for a Fed rate hike next week, which favors USD bulls and should cap gains for the NZD/USD pair. Escalating US-Iran tensions remain supportive of elevated crude oil prices, which shot to the highest level since May 21 on Thursday, adding to concerns about inflation risks stemming from the Middle East conflict.