Rising US PCE inflation boosts Fed rate hike expectations, strengthening the USD and weighing on the New Zealand Dollar.
The NZD/USD pair dropped to near 0.5950 in early Asian trading on Thursday, extending mild losses. The decline follows stronger-than-expected US inflation data, which fueled bets for a Federal Reserve rate hike, lifting the USD against the NZD.
US Personal Consumption Expenditures (PCE) data reinforced expectations of tighter monetary policy, contrasting with recent market sentiment. The NZD had previously shown resilience but struggled to hold gains amid broad USD strength.
Markets are now pricing in a higher probability of a Fed rate increase in the near term, pressuring risk-sensitive currencies like the NZD.