NZD/USD Maintains Below 0.6300 as Market Sentiment Declines; US Inflation Watched

The NZD/USD pair is crumbling like a house of cards as market participants dump risk-perceived securities as uncertainty about the US inflation report looms in the FX realm. In anticipation of stronger inflation numbers that may require the Federal Reserve (Fed) to implement consecutive big rate hikes, the asset has fallen below 0.6300.

The market also anticipates that the Fed will announce a 75 basis point (bps) increase in interest rates in June. Although it appears inconsistent with Fed head Jerome Powell's statement that a 75 basis point rate hike is not under discussion. The Fed had no choice but to increase interest rates as a result of the multi-decade inflation's resurgence.

According to the market consensus, the annual CPI is projected to be 8.1%, while the core CPI, which excludes food and energy, is projected to be 6%. In the meantime, Loretta Mester, president of the Federal Reserve Bank of Cleveland, has stated that the Fed would continue to raise interest rates unless it observes a significant decline in inflation levels.

On the kiwi front, the situation appears to have deteriorated, as the Bank of New Zealand (BNZ) has predicted that "New Zealand's economic growth will cease in 2023." It appears that greater inflation has begun to manifest itself presently. The BNZ also reported that the likelihood of a recession in New Zealand is growing daily. This may diminish the demand for antipodean goods even further.

NZD/USD