NZD/USD loses ground after lower Kiwi Inflation Expectations, edges lower to near 0.6110

• NZD/USD extends its losses after the release of Inflation Expectations from New Zealand.
• RBNZ Inflation Expectations (Q1) rose by 2.5%, down from the previous reading of 2.7%.
• The US Dollar gains ground ahead of the scheduled release of the US Inflation data.

NZD/USD continues to decline for the second consecutive session, reaching near 0.6110 during the Asian trading session on Tuesday. The New Zealand Dollar (NZD) faces pressure against the US Dollar (USD), partly due to lower Kiwi inflation expectations in the first quarter. RBNZ Inflation Expectations (QoQ) increased by 2.5%, down from the previous reading of 2.7%.

Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr testified before the Finance and Expenditure Committee on Monday, emphasizing that inflation remains elevated, prompting the RBNZ to maintain the cash rate at 5.5%. Additionally, RBNZ Deputy Governor (Financial Stability) Christian Hawkesby reiterated the strength of the New Zealand financial system, stating that it can withstand high interest rates. Furthermore, New Zealand Finance Minister Nicola Willis announced that the government budget will be revealed on May 30th.

The US Dollar Index (DXY), which gauges the USD against six major currencies, aims to hold onto its recent gains, climbing to around 104.20. Despite this upward movement, the 2-year and 10-year US bond yields remain at 4.47% and 4.16%, respectively, at the current time. These relatively lower yields may limit the upward momentum of the Greenback.

The NZD/USD pair faces downward pressure as the US Dollar strengthens amid subdued US Treasury yields. Market sentiment remains mixed ahead of the release of US inflation data scheduled for Tuesday, which could influence expectations regarding interest rates.

The US Consumer Price Index (CPI) is projected to moderate, with a year-on-year increase of 2.9% compared to the previous rise of 3.4%. Similarly, the month-over-month rate is expected to remain unchanged at 0.2%. Core CPI YoY is anticipated to rise by 2.9%, down from the previous increase of 3.4%. The monthly core inflation is forecasted to stay consistent at 0.3%.