Rising US inflation data fuels bets of a 25 basis point Fed rate hike, weighing on the New Zealand Dollar against the USD.
The NZD/USD pair fell to near 0.5850 in early European trading Friday, pressured by stronger-than-expected US inflation data. April’s Producer Price Index (PPI) rose at its fastest pace since 2022, while the Consumer Price Index (CPI) climbed the most since 2023, reducing expectations for Federal Reserve rate cuts this year.
Market sentiment remains cautious as traders await further developments from the US-China summit. Uncertainty over trade negotiations and geopolitical tensions, including the Strait of Hormuz, adds downward pressure on the Kiwi, a proxy for China-linked currencies.
According to the CME FedWatch tool, markets now price a 36.9% chance of a 25 basis point Fed rate hike, bolstering the USD and capping gains for the NZD/USD pair.