The NZD/USD pair saw modest gains, reaching near 0.5600 during Wednesday’s Asian trading session, supported by cooler-than-expected US December Producer Price Index (PPI) inflation data, which weakened the US Dollar (USD) and provided a tailwind for the Kiwi.
Market Overview: US Dollar Weakens Post-PPI Data
The US Dollar Index (DXY), which tracks the USD against a basket of major currencies, dipped to around 109.20 following the PPI report. According to data released by the US Bureau of Labor Statistics on Tuesday, the PPI rose by 3.3% year-over-year (YoY) in December, up from 3.0% in November. However, this was softer than the market’s anticipated 3.4%. Meanwhile, the core PPI, which excludes the volatile prices of food and energy, climbed 3.5% YoY, slightly below the consensus forecast of 3.8% and up from 3.4% in the previous month.
Attention Shifts to US CPI Data and Potential Tariff Impacts
With the softer-than-expected PPI data, traders are now turning their focus to the US December Consumer Price Index (CPI) report, set for release later on Wednesday. Any surprise upside in inflation could fuel hawkish expectations for the US Federal Reserve (Fed), potentially supporting the Greenback and pushing US Treasury yields higher.
Additionally, reports suggesting that incoming President Donald Trump may adopt a more gradual approach to implementing trade tariffs have eased some concerns, providing relief to the New Zealand Dollar (NZD). “Currency markets are breathing a sigh of relief after a report suggested that the incoming Trump administration could follow a ‘gradual’ trajectory in ratcheting tariffs higher,” said Karl Schamotta, a foreign exchange analyst at Corpay.
As the market awaits further developments, both the US inflation data and trade policy outlook will be key drivers for the NZD/USD pair in the near term.
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