NZD/USD Breaks Above 0.6100

NZD/USD strengthened to around 0.6130 in early Asian trading on Tuesday. The dollar consolidated as traders awaited testimony from Federal Reserve Chairman Jerome Powell on Tuesday ahead of the RBNZ rate decision on Wednesday.

Despite signs of weak economic activity in New Zealand, the RBNZ is expected to keep the official cash rate (OCR) unchanged at 5.50% at its July meeting on Wednesday. Traders will get more clues from the monetary policy statement. If the RBNZ maintains a hawkish stance, it may support the New Zealand dollar in the short term.

On the other hand, more and more investors speculate that the Federal Reserve will cut interest rates earlier than expected this year, which has put some selling pressure on the US dollar. The CME FedWatch tool shows that traders are currently pricing in a probability of a Fed rate cut in September of nearly 76%, up from 64% a week ago.

In the United States, June consumer price index (CPI) data may provide some hints on the trajectory of US inflation. US inflation is expected to fall to 3.1% in June from 3.3% in May, while core inflation is expected to remain at 3.4% in June. Any signs of weakness in US inflation could drag the dollar lower and boost NZD/USD.

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