• Losses are prolonged in NZD/USD as a result of the US Dollar’s upward retracement.
• The Fed is still wary of inflation and prospective rate reductions in 2024.
• Higher PPI inputs and outputs for Q1 could provide some assistance for the New Zealand dollar.

Throughout Friday’s Asian session, the NZD/USD pair continued to decline, closing in on 0.6110. The US Dollar (USD), which recovered after hitting multi-week lows on Thursday around 104.00, is responsible for this fall.

About inflation and the possibility of rate reductions in 2024, the Federal Reserve (Fed) continues to take a cautious approach. President of the Fed Bank of Atlanta Raphael Bostic stressed the importance of exercising patience when it comes to interest rates on Thursday, pointing out that the US economy is still under significant pricing pressure.

Furthermore, President of the Cleveland Fed Loretta Mester hinted that it would take longer than expected to determine the inflation trend with confidence, implying that the Fed ought to continue its tight policy for a considerable amount of time.

In addition, on Thursday the US Department of Labour published the US Initial Jobless Claims. For the week ending May 10, the number of Americans submitting new claims for unemployment benefits increased to 222,000, above the 220,000 market average but less than the 232,000 recorded the week before.

In other Kiwi news, the first quarter saw increases in both inputs and outputs according to New Zealand’s Producer Price Index (PPI). Input prices for PPI increased by 0.7% as opposed to the predicted 0.7%. In contrast to the predicted 0.5% increase, PPI production prices grew by 0.9%. The New Zealand Dollar (NZD) may find some support from these PPI statistics that were stronger than anticipated, which could limit the NZD/USD pair’s decline.

Stats NZ indicates that the main drivers of the increase in output prices were gas and electricity, with a quarter-on-quarter increase of 8.8% each. Input prices were also greatly affected by energy costs, which increased by 11.6%. In addition, the 5.0% quarterly increase in insurance costs was a significant factor in the overall increase in PPI input costs.

NZD/USD