• NZD/USD moves higher as the Greenback edges lower at the end of the week.
• Markets expect the Fed to keep rates unchanged in the near term despite persistent inflationary pressures.
• New Zealand’s central bank remains confident about growth while viewing inflation as contained.

NZD/USD trades around 0.6000 on Friday at the time of writing, up 0.19% on the day, benefiting from a modest pullback in the US Dollar (USD) amid a wait-and-see mood ahead of fresh signals on the outlook for monetary policy in the United States (US). The pair remains close to a psychological level as investors adjust positions following recent central bank comments and inflation data releases.

The US Dollar is losing ground despite stronger-than-expected producer inflation figures. The Producer Price Index (PPI) rose by 0.5% MoM in January, above expectations, while the core measure, which excludes food and energy, jumped by 0.8%. On a yearly basis, producer inflation came at 2.9%, above the 2% target set by the Federal Reserve (Fed). These data support the view that the US central bank may keep a cautious stance for longer.

According to the CME FedWatch tool, traders largely anticipate no change in interest rates at the March and April meetings. However, expectations for rate cuts later in the year remain in place. Chicago Fed Bank President Austan Goolsbee stated that he would favor several rate reductions if price pressures sustainably return to the 2% target, while emphasizing that he does not want to act prematurely without clear evidence that inflation is moving back toward the goal.

On the New Zealand side, the New Zealand Dollar (NZD) remains resilient. Investors believe that the Reserve Bank of New Zealand (RBNZ) is unlikely to raise rates in the near term, yet the institution has expressed confidence that the economy can continue to grow without generating renewed inflationary pressures. This perception limits downside pressure on the Kiwi and supports the pair against a slightly softer US Dollar.