Anna 
During early European trading on Wednesday, NZD/USD continued its upward momentum as the US dollar (USD) faced selling pressure following profit-taking in the previous two sessions. The currency pair was observed trading around 0.6110.
In economic data released on Wednesday, New Zealand’s Consumer Price Index (CPI) for the fourth quarter displayed a year-on-year figure of 4.7%, in line with expectations. Despite a slight dip from the previous value of 5.6%, consumer inflation in New Zealand remains above the Reserve Bank of New Zealand’s (RBNZ) target range of 1.0% to 3.0%.
The elevated consumer inflation level is seen as a factor that reduces the likelihood of an immediate interest rate cut by the RBNZ. The central bank is expected to exercise caution in implementing rate cuts amid persistent inflationary pressures.
Simultaneously, the U.S. Dollar Index (DXY) experienced a decline toward the 103.40 level. At the time of reporting, the 2-year and 10-year U.S. bond coupon yields were recorded at 4.32% and 4.10%, respectively. The movement in bond markets suggests a potential impact on the performance of the U.S. dollar. Investors are also closely monitoring S&P Global Purchasing Managers Index (PMI) data from the United States, scheduled for release on Wednesday.
Market sentiment indicates a consensus that the Federal Reserve is less likely to implement interest rate cuts in March. However, former St. Louis Fed President James Bullard holds a different perspective, suggesting that the Fed might consider cutting interest rates before inflation reaches the 2.0% target. Bullard speculates that a rate cut could potentially occur as early as March, introducing an element of divergence in views within the financial community.
