NZD/USD pushed higher on Thursday, extending gains for a second session as the US Dollar (USD) retreated following the latest US Consumer Price Index (CPI) release. The pair briefly touched 0.5973, its strongest level since August 14, and was last seen up nearly 0.50% on the day. Meanwhile, the US Dollar Index (DXY) eased back toward 97.50 after retreating from recent highs.
US inflation data keeps Fed expectations intact
The Bureau of Labor Statistics reported that headline CPI rose 0.4% month-over-month in August, accelerating from 0.2% in July and above the 0.3% consensus. On a yearly basis, headline inflation held steady at 2.9%, up from 2.7% previously. Core CPI, which excludes food and energy prices, increased 0.3% MoM and 3.1% YoY, matching expectations and unchanged from July.
The figures reinforced market expectations that the Federal Reserve will lower interest rates by 25 basis points at its meeting next week. According to Fed funds futures, traders remain nearly unanimous in pricing in the move.
RBNZ signals further easing as recovery lags
On the domestic front, Reserve Bank of New Zealand (RBNZ) Governor Christian Hawkesby acknowledged earlier this week that the economy “stalled” mid-year but noted inflation has returned to the central bank’s 1–3% target band. He indicated the Official Cash Rate (OCR) could fall toward 2.50% by year-end, though the pace of cuts will hinge on the strength of the recovery.
Hawkesby also highlighted that the RBNZ is undergoing a “test of trust and confidence” after recent leadership changes, while reiterating its commitment to maintaining price stability.
Market outlook: key data releases ahead
Traders will turn their attention to Friday’s BusinessNZ Manufacturing PMI for August. July’s reading rebounded sharply to 52.8 from 49.2, pushing back into expansionary territory for the first time in three months. A softer print could weigh on the Kiwi, while a solid result may provide fresh support.
In the US, investors will focus on the preliminary University of Michigan surveys covering consumer sentiment, economic expectations, and inflation outlooks over one- and five-year horizons.
