NZD/USD Rises Above 0.6000 as Soft US Inflation Data Weakens Dollar

NZD/USD Climbs Above 0.6000 as Weak US CPI Drives Fed Rate Cut Expectations

The NZD/USD pair strengthened to around 0.6035 during Thursday’s early Asian session, as the US Dollar (USD) weakened in response to softer-than-expected US inflation data. The subdued CPI figures have amplified market bets that the Federal Reserve (Fed) will begin cutting interest rates, possibly as early as September.

US CPI Misses Forecasts for Fourth Consecutive Month

According to the US Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) rose 2.4% year-over-year (YoY) in May, slightly above April’s 2.3% but below the 2.5% forecast. Meanwhile, the core CPI, which excludes food and energy, climbed 2.8% YoY, under the 2.9% consensus.

This marks the fourth straight month of weaker-than-expected inflation, prompting traders to increase their bets on a Fed rate cut.

Rate Cut Odds Jump After CPI Report

Market participants are now pricing in a 68% probability that the Fed will lower rates by 25 basis points (bps) in September, up from 57% before the CPI release. Additionally, there’s now an 18% chance of a rate cut in July, compared to just 13% earlier this week, as per interest rate futures data.

“Soft inflation data has made rate cuts more likely, placing downward pressure on the USD,” analysts noted.

Trump Signals China Trade Deal Is ‘Done’

Adding to the market narrative, former US President Donald Trump commented that a trade deal with China is 'done', though details from Beijing remain unclear. While not directly impacting the NZD/USD pair, such headlines can influence overall risk sentiment and global currency flows.

What’s Next for NZD/USD Traders?

Eyes are now on upcoming US Producer Price Index (PPI) data and the weekly Initial Jobless Claims report due later Thursday. Both indicators could offer further insight into the inflation outlook and help confirm or challenge current rate cut expectations.

Key Takeaways:

• NZD/USD trades stronger near 0.6035 in early Asian hours.
• US May CPI came in at 2.4% YoY, below 2.5% expected.
• Traders now price in 68% chance of a Fed rate cut in September.
• Trump claims a China trade deal is “done,” adding to risk-on sentiment.
• US PPI and Jobless Claims data will guide short-term moves.

Further Reading on Tredu.com:

• How US CPI Data Affects Forex Markets
• Rate Cut Watch: What to Expect from the Fed
• NZD/USD Technical and Fundamental Analysis