Cooling US inflation reduces expectations for Federal Reserve rate increases, lifting risk assets and the New Zealand Dollar.
The New Zealand Dollar trades at 0.5820 against the USD in European trading, extending gains from Tuesday amid a risk-on market mood. Easing fears of Federal Reserve rate hikes this year support demand for higher-yielding assets like the NZD.
Fed rate hike probabilities for this month have dropped to 16.6% from 31% last week, according to the CME FedWatch tool. The shift follows faster-than-expected cooling in US inflation for June. S&P 500 futures rose 0.25% to 7,563, reflecting broad risk appetite.
The US Dollar Index (DXY) remains near 101.00 after recovering early losses. Investors await June’s US Producer Price Index data at 12:30 GMT for further inflation signals.