NZD/USD extends losses near 0.6020 after US wholesale inflation, focus shift to CPI

• NZD/USD continues to lose ground after upbeat US data.
• US CPI is expected to drop in the annual rate for September.
• US Dollar faces challenges despite higher-than-expected US wholesale inflation.

NZD/USD extends losses after snapping the five-day winning streak, pulling back from the two-month high. The spot trades lower around 0.6020 during the Early Asian session on Thursday. The pair is facing challenges after the higher-than-expected US wholesale inflation and the release of the FOMC minutes.

US Producer Price Index (PPI) surged in September, jumping from 2.0% to 2.2%, surpassing the anticipated 1.6%. The real suspense builds up for Thursday’s Consumer Price Index (CPI) unveiling. Forecasts hint at a drop in the annual rate for September, slipping from 3.7% to 3.6%. Brace for some market turbulence. Additionally, keep an eye out for the weekly Jobless Claims report coming your way.

The minutes from the Federal Open Market Committee (FOMC) highlighted a divergence in viewpoints, emphasizing the reliance on data and suggesting that a substantial uptick in inflation would be crucial to garner consensus for additional interest rate hikes.

Some participants expressed the view that as the policy rate approaches or reaches its peak, the attention in monetary policy decisions and communications should transition from determining the extent of rate increases to defining the duration of maintaining the policy rate at restrictive levels.

Speculations are swirling about the US Federal Reserve (Fed) abandoning the idea of a rate hike, fueled by dovish comments and neutral stances from officials.

Fed Governor Christopher Waller has suggested a watchful approach to rate developments, noting that financial markets tightening “would do some of the work for us.” Meanwhile, Fed Governor Michelle Bowman has expressed a preference for another rate hike, citing inflation persisting above the Fed’s 2% target. The contrasting views within the Fed contribute to the complexity of the current economic landscape.

The US Dollar Index (DXY) struggling to hold ground around 105.70 at the time of writing due to the downbeat US Treasury yields. 10-year US Treasury bond yield stands at 4.56%, by the press time.

The Food Price Index (FPI) from Statistics New Zealand, which gauges changes in food prices, revealed a decrease of 0.4% in September compared to the 0.5% increase observed in August. Moreover, the Business NZ PMI will be eyed on Friday by investors, seeking further cues on the economic situation.

The Reserve Bank of New Zealand (RBNZ) opted to maintain the Official Cash Rate (OCR) at 5.5% in its last policy meeting. The central bank expressed agreement that interest rates might need to be maintained at a restrictive level for an extended period, as highlighted in the RBNZ statement.

This stance likely played a role in contributing strength to the recent performance of the Kiwi pair.