In Tuesday’s session, the NZD/USD managed to jump above the 200-day to a high of 0.6177 but retreated to 0.6145 as the US Dollar lost strength following the release of the May Consumer Price Index (CPI). As the data came in below expectations, market participants are fully discounting that the Federal Reserve will not raise interest rates on Wednesday. 

Investor’s assessment of US CPI weakened the US Dollar

The US Bureau of Labor Statistics released the Consumer Price Index (CPI) for May, which fell slightly below expectations. The headline figure declined to 4% YoY, compared to the expected 4.1%, while the Core measure matched expectations at 5.3% YoY. The monthly measures from both the CPI and Core CPI rose by 0.1% and 0.4%, respectively.

Following the release of the data, markets have fully priced a pause at the upcoming Federal Reserve meeting on Wednesday, which seems to be weakening the Greenback. Attention now turns to clues on forward guidance. The CME FedWatch Tool suggests that investors are betting on a 63% probability of a rate hike in July.

In addition, the release of updated macroeconomic forecasts and dot plots from the Federal Open Market Committee (FOMC) will also contribute to the shaping of expectations of future Fed meetings.