- NZD/USD is struggling after the RBNZ’s latest multi-period monetary survey showed mixed outlook for Q1 2025.
- New Zealand’s two-year inflation expectations fell from 2.12% in the fourth quarter of 2024 to 2.06% in the first quarter.
- Better-than-expected U.S. inflation data has reduced the likelihood of the Fed taking a dovish stance at its June monetary policy meeting.
NZD/USD has continued its downward trend for the second consecutive day, trading around 0.5640 during Thursday’s Asian session. The pair is facing pressure following the release of New Zealand’s inflation expectations. The latest monetary conditions survey by the Reserve Bank of New Zealand (RBNZ) showed a mixed outlook for Q1 2025 across various time frames.
Two-year inflation expectations, a key indicator closely watched by the RBNZ, declined to 2.06% in Q1 from 2.12% in Q4 2024. On the other hand, the one-year inflation expectation increased to 2.15% from 2.05% in the previous quarter.
The New Zealand Dollar (NZD) remains under pressure amid growing speculation that the RBNZ may implement further rate cuts. The central bank will hold its first monetary policy meeting of the year next week, following three rate cuts in 2024 that lowered borrowing costs to 4.25% in response to mild inflation.
In the United States, the Bureau of Labor Statistics reported on Wednesday that the Consumer Price Index (CPI) rose by 3.0% year-over-year in January, surpassing the expected 2.9%. The core CPI, which excludes food and energy, increased to 3.3% from 3.2%, above the forecast of 3.1%. On a monthly basis, headline inflation jumped to 0.5% in January from 0.4% in December, while core CPI rose to 0.4% from 0.2%.
Stronger-than-expected U.S. inflation data has led traders to reduce expectations of a dovish Federal Reserve stance for the June policy meeting. According to the CME FedWatch tool, the probability of a rate cut in June has fallen to nearly 30% following the release of the U.S. inflation data.
