NZD/USD Depreciates To Around 0.6150

NZD/USD moved lower as traders favored the greenback ahead of the Federal Reserve (FED) decision and the release of U.S. inflation data for May. NZD/USD moved lower to around 0.6140 in the European session on Wednesday.

The Fed is widely expected to keep its policy rate unchanged, keeping it between 5.25%-5.50% in June as it works to bring inflation down to its 2% target. Strong labor market conditions in the U.S. reduce the likelihood of a rate cut by the Fed in September. According to the CME FedWatch tool, the probability of a rate cut of at least 25 basis points in September fell to 52% from 67% a week ago.

Investors are likely to keep a close eye on key U.S. inflation data due later in the North American session. The U.S. headline and core CPI data for May are expected to show year-on-year growth of 3.4% and 3.5%, respectively.

In the NZD, consumer inflation remained stable in May, while producer price deflation eased in China, New Zealand’s main trading partner. This situation suggests that more stimulus measures are needed to boost demand. In May, China’s consumer price index (CPI) rose 0.3% year-on-year, below expectations of 0.4%. On a monthly basis, China’s CPI fell 0.1%, compared with a 0.1% increase in April.

Despite the weak economy, New Zealand’s high interest rates continue to support the New Zealand dollar (NZD). The Reserve Bank of New Zealand (RBNZ) is expected to maintain its current policy stance until at least mid-2025.

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