Ella 
In early trading on Thursday, NZD/USD strengthened to around 0.6120. U.S. inflation was weak in April, prompting market concerns about the prospect of the Federal Reserve (Fed) cutting interest rates this year, which put some selling pressure on the dollar. Later in the day, U.S. housing data, weekly jobless claims, Philadelphia Fed manufacturing index and industrial production data will be released.
The U.S. Bureau of Labor Statistics (BLS) released a report on Wednesday saying U.S. inflation is showing signs of cooling. Inflation rose at an annual rate of 3.4%, compared with 3.5% in March, in line with expectations. Core inflation, which excludes volatile items such as food and energy, fell to 3.6% in April from 3.8% in March, as expected. Additionally, U.S. retail sales came in at 0% monthly in April, below consensus expectations of 0.6%. The U.S. dollar (USD) fell to a near five-week low of 104.20 on weak inflation data and weak retail sales.
Investors expect the Fed to wait for more data to gain confidence that inflation will return to the Fed’s 2% target. Federal Reserve Chairman Jerome Powell said on Tuesday that inflation was falling slower than expected and producer price index data provided more reason to keep interest rates higher for longer.
In the New Zealand dollar, the market believes that the Reserve Bank of New Zealand is unlikely to cut interest rates before the Federal Reserve, which boosts the New Zealand dollar and boosts NZD/USD. The Reserve Bank of New Zealand’s interest rate decision next week will be closely watched. Analysts at Westpac said the Reserve Bank of New Zealand is expected to keep the official cash rate (OCR) unchanged at 5.5% at its May meeting and is likely to remain optimistic about the forward-looking outlook conveyed at its February meeting.
