NZD/USD holds a negative note near 0.6170 in Tuesday’s early Asian session.
Sticky inflation in the US prompted investors to push back against the expectation of rate cuts.
The RBNZ is expected to keep the rate on hold on Wednesday, but the possibility of a hike cannot be ruled out.
Market players will monitor the RBNZ monetary policy meeting and the US Gross Domestic Product Annualized for Q4.
The NZD/USD pair trades on a weaker note around 0.6170 after retracing from the 0.6200 barrier during the early Asian session on Tuesday. The pair edges lower despite the weaker US Dollar Index (DXY). Investors await the Reserve Bank of New Zealand (RBNZ) interest rate decision on Wednesday, with no change in rates expected.
The recent US inflation data showed a sticky inflation in the United States and prompted investors to push back against the expectation of rate cuts. The Federal Reserve (Fed) emphasized a tightening policy to bring inflation back down to its 2% target, but prices are still well above this mark. New York Fed President John Williams warned last week about the possibility of early rate cuts, adding that the central bank is on track to lower borrowing costs later this year.
The RBNZ is expected to keep the Official Cash Rate steady at 5.5% on Wednesday, but the possibility of a hike remains as inflation proves difficult to curb. The market is pricing in a 25% odd rate hike since the RBNZ has held the rate since May last year. In recent weeks, the RBNZ policymakers delivered hawkish remarks, which lifted the New Zealand (NZD) against the US Dollar (USD). Chief economist Paul Conway said last month that the central bank still has a way to go to bring inflation back to its 2% target, while Orr stated that it has more work to do to anchor inflation expectations.
Traders will keep an eye on the RBNZ monetary policy meeting on Wednesday. Later in the day, the US Gross Domestic Product Annualized for the fourth quarter (Q4) will be due. Attention will turn to the Personal Consumption Expenditures (PCE) Index on Thursday. These data could give a clear direction to the NZD/USD pair.
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