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Dollar Weakness Causes NZD/USD to Trade Sideways above 0.6000; US PCE Data Is Anticipated
NZD/USD fluctuates near 0.6000 in the early Asian trading session on Tuesday. MoM, new home sales in the United States decreased by -0.3% in February, compared to a 1.7% increase in January, which was below expectations. Apprehensions regarding sluggish economic expansion and the decline in GDP figures impact heavily on the New Zealand dollar.
On Tuesday morning, the NZD/USD pair trades on a neutral note near the 0.6000 mark during the early Asian session. The USD Index (DXY) maintains its position above the 104.00 level despite a decline from recent peaks. Investors eagerly anticipate the February Personal Consumption Expenditures Price Index (PCE) data from the United States, which may provide insight into inflation's underlying momentum.
The US New Home Sales for February decreased 0.3% month-over-month on Monday, following a 1.7% increase in January, which was below market expectations of a 2.3% month-over-month increase. In the interim, the Dallas Fed Manufacturing Survey experienced a decline from -11.3 to -14.4 in March. On Friday, the focus will be on the US PCE report. It is anticipated that the headline PCE will increase by 0.4% MoM, whereas the Core CPE will increase by 0.3% MoM.
Policymakers at the US Federal Reserve (Fed) have signaled that they will be able to reduce interest rates once they have gained assurance that inflation is making steady progress towards the objective of 2.0%. Investors expect the incoming data to eliminate the possibility of a rate cut in May, and the initial rate cut is anticipated to occur at the June meeting. Federal Funds Futures have incorporated a 74.5 percent probability, according to the CME Group's FedWatch instrument, that the Fed will reduce interest rates in June.
The final quarter of 2024, however, saw the onset of a technical recession in New Zealand, which was primarily caused by feeble wholesale trade and consumer expenditure. As a result, the New Zealand Dollar (NZD) is negatively affected, and the NZD/USD pair faces a headwind. Furthermore, the GDP growth figures that fell short of expectations could potentially persuade the Reserve Bank of New Zealand (RBNZ) to reduce the official cash rate (OCR) in advance of schedule.
The Conference Board's US Consumer Confidence, orders for durable goods, and the FHFA's House Price Index are all upcoming releases. The publication of the New Zealand ANZ Business Confidence is scheduled for Wednesday. The US PCE report is anticipated to be a highly anticipated occasion on Friday.
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