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NZD/USD Fluctuates Near 0.6360; a Rise Is Probable As Investors' Risk Appetite Improves
The NZD/USD exchange rate is fluctuating at 0.6360 in advance of the US Inflation data. The Fed will likely raise interest rates to bolster its battle against persistent inflation. New Zealand’s monthly Food Price Index has decreased to 1.7% from the consensus of 2.2%.
During the Asian session, the NZD/USD pair is displaying back-and-forth movement near 0.6360. As investors await the release of the United States Consumer Price Index (CPI) data for fresh impetus, the New Zealand dollar has gone sideways following a vertical uptrend. Any unexpected movement in the U.S. inflation rate is anticipated to generate extreme volatility in the underlying asset.
The risk profile is exceptionally optimistic as risk-sensitive assets, such as the S&P 500, posted solid gains on Monday. As the Federal Reserve (Fed) is likely to increase interest rates to bolster its defense against persistent inflation, investors weighed the inflation risk to the upside. The US Dollar Index (DXY) is developing its auction below 103.00 as market players' increased risk appetite has diminished the safe-haven attractiveness. In the meantime, 10-year US Treasury Yields have lost some vigor and declined to approximately 3.70 percent.
The rebound of risk-perceived currencies indicates that investors do not anticipate any unexpected movement in US inflation. The optimistic job market statistics was the impetus that compelled street smarts to alter their inflation forecasts. However, consumer expenditure and economic activity are still in a stage of decline. Consequently, the inflation numbers may come close to expectations.
Analysts at RBC Economics anticipate a decrease in CPI increase in January to 6.2% from 6.5% in December (YoY). The growth of food prices likely slowed, albeit from extremely high levels. In contrast, we estimate energy price growth to increase for the first time in seven months, albeit at a rate significantly below June's peak of 42%, at 8%. We look for core inflation to decline further in January, coming in at 5.4% YoY, down from 5.7% in December. Recent inflation statistics have indicated a reasonably widespread reduction in pricing pressures."
Meanwhile, the New Zealand Dollar is anticipating the release of the Inflation Expectations (Q1) from the Reserve Bank of New Zealand (RBNZ) (RBNZ). As monthly inflation figures decreased in December, the RBNZ could reduce its inflation forecasts. In addition, during the fourth quarter of 2022, the unemployment rate increased to 3.4%. In early Asia, Statistics New Zealand announced a Food Price Index (Jan) of 1.7%, which was lower than the consensus estimate of 2.2% but higher than the previous release of 1.0%.
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