The NZD/USD pair climbed to 0.6120 during Friday’s New York session, driven by a weakening US Dollar (USD) amid growing certainty of Federal Reserve (Fed) rate cuts starting in September. The US Dollar Index (DXY) slumped towards crucial support at 104.00, while risk sentiment remained buoyant, reflected in the S&P 500’s strong gains and falling 10-year US Treasury yields.
Fed Rate Cut Expectations Firming
The CME FedWatch tool indicates a high probability of Fed rate cuts in September, with further easing expected in November or December. This outlook is fueled by cooling US inflation, as evidenced by the recent Consumer Price Index (CPI) report. However, the Producer Price Index (PPI) for June surprised with a stronger-than-expected rise, raising questions about the pace of future disinflation.
New Zealand Economic Concerns
On the flip side, the New Zealand Dollar (NZD) faces headwinds due to disappointing Business NZ PMI data for June, which contracted significantly. This has raised concerns about the New Zealand economy and increased expectations of early rate cuts by the Reserve Bank of New Zealand (RBNZ).
Key Points:
- NZD/USD surges as Fed rate cut expectations strengthen.
- US Dollar weakens, DXY approaches critical support.
- Market sentiment remains positive amid risk-on mood.
- Softer US CPI fuels rate cut bets, while PPI rise raises concerns.
- Weak New Zealand PMI data weighs on NZD, hints at potential RBNZ easing.