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NZD/USD trades sideways above 0.6000 on softer US Dollar, US PCE data eyed

  • NZD/USD hovers around 0.6000 in Tuesday’s early Asian session. 
  • The US February New Home Sales came in at -0.3% MoM vs. 1.7% gain in January, weaker than expected. 
  • Concerns over stunted economic growth and the slump in the GDP numbers weigh on the Kiwi. 

The NZD/USD trades on a flat note around the 0.6000 mark during the early Asian session on Tuesday. The USD Index (DXY) retreats from the recent peaks and remains above the 104.00 mark. Investors await the US February Personal Consumption Expenditures Price Index (PCE) data, which might offer some hints about underlying momentum in inflation.

On Monday, the US February New Home Sales dropped 0.3% MoM from a 1.7% gain in January, below the market expectations for a 2.3% MoM rise. Meanwhile, the Dallas Fed Manufacturing Survey fell to -14.4 in March from the previous reading of -11.3. The US PCE report on Friday will be in the spotlight. The headline PCE is estimated to show an increase of 0.4% MoM, while the Core CPE is projected to rise by 0.3% MoM. 

The US Federal Reserve (Fed) policymakers indicated that they will be in a position to cut interest rates when they have confidence that inflation is progressing towards the 2.0% target. Investors anticipate the incoming data to rule out a May rate cut, and the first rate cut is likely to happen in the June meeting. According to CME Group’s FedWatch tool, Federal Funds Futures have priced in 74.5% odds that the Fed will cut rates in June.

On the other hand, New Zealand’s economy entered a technical recession in the final quarter of 2024, driven by weak consumer spending and wholesale trade. This, in turn, weighs on the New Zealand Dollar (NZD) and creates a headwind for the NZD/USD pair. Additionally, the weaker-than-expected GDP growth numbers might convince the Reserve Bank of New Zealand (RBNZ) to cut the official cash rate (OCR) sooner than expected. 

Moving on, US Consumer Confidence by the Conference Board, Durable Goods Orders, and the FHFA’s House Price Index will be due. On Wednesday, the New Zealand ANZ Business Confidence will be published. On Friday, the US PCE report will be a closely watched event.