The NZD/USD pair is recovering from its recent losses, trading around 0.6150 during the Asian trading session on Thursday. This rebound is largely driven by an improved risk appetite, fueled by growing expectations of a 25-basis points rate cut by the Federal Reserve (Fed) in September.
Recent data from the US Consumer Price Index (CPI) revealed a drop in headline inflation to a three-year low, although core inflation exceeded forecasts. August’s CPI data showed a year-on-year decline to 2.5% from the prior 2.9%, falling short of the anticipated 2.6%. Month-over-month, the CPI rose by 0.2%. In contrast, core CPI, excluding food and energy, remained steady at 3.2% year-on-year, with a monthly increase to 0.3% from 0.2%.
The CME FedWatch Tool indicates that markets are now fully expecting a 25 basis point rate cut by the Fed at its September meeting. The probability of a 50 basis point cut has notably decreased to 15.0%, down from 44.0% a week earlier.
In New Zealand, Electronic Card Retail Sales increased by 0.2% month-on-month in August, recovering from a 0.1% decline in July. On a yearly basis, electronic card transactions fell by 2.9%, an improvement from the previous month’s 4.9% drop. The Food Price Index rose by 0.2% in August, a slowdown from July’s 0.4% increase.
The Reserve Bank of New Zealand (RBNZ) initiated its easing cycle in August with a 25 basis point interest rate cut. Expectations are high for further rate reductions at the remaining meetings this year, with the cash rate potentially falling from the current 5.25% to 3.0% by the end of 2025.
