- NZD/USD drifts higher to around 0.5930 in Wednesday’s early Asian session.
- China’s CPI fell more than expected in August.
- US rate futures show a high chance of a Fed rate cut this month.
The NZD/USD pair gathers strength near 0.5930 during the Asian trading hours on Wednesday. The New Zealand Dollar (NZD) edges higher against the Greenback despite softer Chinese inflation data. The US Producer Price Index (PPI) inflation data for August will take center stage later on Wednesday.
Data released by the National Bureau of Statistics of China on Wednesday showed that China’s Consumer Price Index (CPI) declined 0.4% YoY in August, compared to 0% in July. This figure came in softer than the market expectation of -0.2%. Meanwhile, Chinese CPI inflation came in at 0% MoM in August versus a rise of 0.4% prior.
The Producer Price Index (PPI) decreased 2.9% YoY in August, following a 3.6% fall in July, in line with the market consensus. However, the Kiwi remains firm in an immediate reaction to the Chinese economic data. It’s worth noting that China’s CPI is often seen as a proxy for Chinese economic health. If the CPI is weak, it signals sluggish demand in the Chinese economy.
Traders ramp up their bets on the US Federal Reserve (Fed) rate cut at its September meeting after a report showing downward revisions of nearly a million fewer jobs to previous government estimates for the April 2024 to March 2025 period. This indicated a far weaker labor market than what the initial numbers showed in that 12-month period.
Financial markets are currently pricing in nearly a 92% odds of a 25 basis points (bps) Fed rate cut later this month and an 8% possibility of a 50 bps reduction, according to the CME FedWatch tool.
