Ella 
US economic data was stronger than expected and NZD/USD continued its decline.
U.S. inflation is expected to fall at an annual rate in September.
Although the U.S. producer price index came in higher than expected, the U.S. dollar still faces challenges.
NZD/USD extended its losses after interrupting its five-day winning streak, retreating from a two-month high. In early Asian trading on Thursday, NZD/USD fell to around 0.6020. NZD/USD faces challenges following stronger-than-expected US PPI and Fed minutes.
The U.S. producer price index (PPI) surged in September to 2.2% from 2.0%, stronger than expected at 1.6%. The real suspense is Thursday’s Consumer Price Index (CPI). Forecasts show U.S. inflation falling to an annual rate of 3.6% in September from 3.7%. Please be prepared for market volatility. Also, keep an eye out for the upcoming weekly jobless claims report.
The minutes of the Federal Reserve meeting highlighted the differences of opinion within the Fed, emphasized that the Fed’s policy will rely on economic data, and suggested that a sharp rebound in inflation is crucial to reaching a consensus on further interest rate hikes.
Some Fed officials participating in the meeting believed that as policy rates approach or reach their peak, the focus of monetary policy decisions and communications should transition from determining the magnitude of interest rate increases to determining the duration of keeping policy rates at restrictive levels.
Speculation that the Fed will abandon its path to raise interest rates is rampant as Fed officials release dovish remarks or a neutral stance.
Federal Reserve Governor Christopher Waller recommended a wait-and-see approach to the path of interest rates, noting that financial market tightening “is going to do some work for us.” Meanwhile, Federal Reserve Governor Michelle Bowman expressed a preference for another interest rate hike, citing inflation that continues to be above the Fed’s 2% target. The current economic situation is further complicated by the contrasting views within the Fed.
The U.S. dollar index was struggling around 105.70 at press time as U.S. Treasury yields fell. As of press time, the 10-year U.S. Treasury yield was 4.56%.
The Food Price Index (FPI), which measures changes in food prices, published by Statistics New Zealand, showed food prices fell 0.4% in September, after rising 0.5% in August. Additionally, investors will also be watching the Business NZ PMI on Friday for further clues on the economic situation.
The Reserve Bank of New Zealand decided to keep the official cash rate (OCR) at 5.5% at its last policy meeting. As the Reserve Bank of New Zealand highlighted in its statement, the Reserve Bank of New Zealand agrees that interest rates may need to remain at restrictive levels for an extended period.
This stance of the Reserve Bank of New Zealand is likely to have contributed to the recent performance of NZD/USD.
