• NZD/USD drifts lower to 0.6060 amid the firmer USD.
• The US CPI rose 0.3% MoM in January; on a 12-month basis, the figure came in at 3.1% versus 3.4% prior.
• NZ inflation expectations eased from 2.76% in Q4 2023 to 2.50% in Q1 of this year.

The NZD/USD pair attracts some sellers above the mid-0.6000s during the early Asian session on Wednesday. The US Dollar edges higher near a three-month high of nearly 105.00 following a stronger US Consumer Price Index (CPI). The pair currently trades near 0.6060, adding 0.02% on the day.

The January CPI came in better than expected, adding to evidence that the FOMC should maintain interest rates high for a few more months. The headline CPI increased 0.3% for the month from 0.2% in the previous reading. On a 12-month basis, the figure came in at 3.1% YoY in January from 3.4% in December, above the market consensus of 2.9%.

The core CPI, excluding volatile food and energy prices, rose 0.4% MoM in January and climbed 3.9% YoY. The figure came in stronger than the expectations of 0.3% and 3.7%, respectively.

The Federal Reserve (Fed) Chair Jerome Powell said on January 31 that the central bank wants to see more data and get greater confidence about the inflationary trajectory before lowering the interest rate. Traders trimmed bets on rate cut expectations this year by over 75 basis points (bps) and are now pricing the first 25 bps rate cut in June with 95 bps of rate cuts priced for the year. This, in turn, lifts the Greenback and weighs on the NZD/USD pair.

The Reserve Bank of New Zealand’s (RBNZ) latest monetary conditions survey revealed on Tuesday that NZ inflation expectations eased from 2.76% in Q4 2023 to 2.50% in Q1 of this year. The market expects that the central bank should reinforce the case for an on-hold decision at the RBNZ’s policy meeting this month and is not forecasting cuts until early 2025.

Moving on, the Fed’s Goolsbee and Barr are set to peak on Wednesday, and the US January Retail Sales will be due on Thursday. On Friday, the attention will shift to the Producer Price Index, which is estimated to show an increase of 0.1% MoM and 0.6% YoY in January