Kiwi Falls As US Inflation Test Looms; Asian Shares Move Down

(CTN News) – A reading on US inflation this week could influence the timing of the Federal Reserve’s easing cycle, while the New Zealand dollar fell sharply after the central bank tempered its hawkish stance.

It reiterated that previous rate hikes had dampened prices, but added the risk of further rate hikes had decreased.

At the end of the day, the Kiwi was trading at $0.61235, down 0.75% from the previous day. Despite somewhat hawkish expectations, the RBNZ closed the door to further rate hikes, according to Saxo Bank’s Charu Chanana.

The low volatility environment may allow NZD longs to unwind in the short run, but in this environment, NZD remains a strong carry.”

As of last Friday, the yen was trading at 150.43 per dollar, a psychologically important level.

Following a week of record peaks for the Nikkei, the index slumped 0.2% on Friday. In Asia-Pacific shares outside Japan, MSCI’s broadest index fell 0.11% to 527.14 points, hovering around a near seven-month high of 531.56 points.

Hong Kong’s Hang Seng index fell 0.31%, while China’s blue-chip index CSI300 rose 0.46% in early trading.

On Thursday, investors will focus on the personal consumption expenditures price index (PCE),

The Fed’s preferred inflation measure.

According to Reuters, the PCE is expected to have risen 0.3% on a monthly basis in January, up from 0.2% in December.

With a slew of strong economic data and inflation that has proven sticky, traders have drastically scaled back their expectations of a deep and early Fed rate cut.

At the start of the year, the markets predicted June to be the start of the easing cycle. In contrast to 150 bps of easing at the beginning of the year, traders now expect 77 basis points of cuts this year.

In light of investors’ near-neutral positioning, Yuting Shao, macro strategist at State Street Global Markets, explained that individual data releases carry weight for a data-dependent Fed.

Inflation and employment readings have raised the prospect that many asset markets may be driven by no landing scenario, even though one data point does not mean a trend.

The second estimate of gross domestic product, jobless claims, and manufacturing activity are also due this week and may influence Fed expectations.

Recent days have also seen Fed policymakers push back against cutting interest rates too early, with Fed Governor Michelle Bowman saying Tuesday that she was not in a rush to lower interest rates, especially given the upside risks to inflation which could stop progress or even resuscitate price pressures.

The Australian dollar weakened in early trading after data showed consumer price inflation held at a two-year low in January, reinforcing expectations interest rates will not rise.

At $0.6537, the Australian dollar was down 0.11%.

US dollar index rose 0.01% against six rival currencies.

As a result, US crude fell 0.41% to $78.55 per barrel and Brent fell 0.41% to $83.31 per barrel, with the prospect of a delayed US rate cut cycle partially offsetting OPEC+’s extension of production cuts.

Gold prices rose 0.1% to $2,030.83 an ounce on Wednesday.

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