NZD/USD Advances Above 0.5950 on Fed Rate Cut Bets and US-China Trade Truce

NZD/USD Advances Above 0.5950 Before US PPI Release

The NZD/USD pair rose to around 0.5985 during Thursday’s early Asian session as the New Zealand Dollar (NZD) gained momentum against the US Dollar (USD). A weaker US Dollar and growing expectations of a Federal Reserve rate cut in September have supported the Kiwi, which continues to benefit from the easing of US-China trade tensions.

Fed Rate Cut Expectations Strengthen

Investors’ optimism regarding a possible Federal Reserve rate cut grew following disappointing US economic data. The US Consumer Price Index (CPI) for July showed a year-on-year increase of 2.7%, lower than the expected 2.8%, while the core CPI rose by 3.1% compared to 2.9% in June, above the market estimate of 3.0%. The combination of slowing inflation and a softening labor market has led traders to increase bets on the Fed cutting rates as early as September.

This has weakened the USD and provided a favorable environment for the NZD/USD pair to rise. As investors await the release of the US Producer Price Index (PPI) and weekly Initial Jobless Claims data later today, the focus remains on whether these figures will further confirm expectations for a Fed rate cut.

US-China Trade Truce Boosts the Kiwi

Another key factor supporting the New Zealand Dollar is the extension of the US-China trade truce. On Monday, US President Donald Trump agreed to extend the trade truce with China for another 90 days, just before the previous agreement was set to expire. This has eased some market concerns, especially in New Zealand, as China is a major trading partner for the country. The truce extension has provided a boost to the China-proxy Kiwi, as it helps to reduce uncertainty in global trade relations.

Furthermore, the US Commerce Department announced that it would provide relief to American companies placed on an export control list and an unreliable parties list, which could further benefit market sentiment in the near term.

Upcoming Data to Watch

With US PPI and Initial Jobless Claims on the docket later today, traders will closely monitor any data that could further influence Fed rate cut expectations. A softer-than-expected PPI or weak jobless claims could add more pressure to the USD and further support the NZD/USD pair.