NZD/USD improves to near 0.6080 after low-impact Kiwi data, US Dollar remains stable

• NZD/USD rebounds from the recent lows after low-impact data from New Zealand.
• Kiwi Card Retail Sales YoY and MoM grew by 1.6% and 1.7%, respectively, in January.
• Traders price in a 37% and 51% probability of a 25 basis points (bps) rate cut by the Fed in May and June, respectively.

NZD/USD rebounds from the recent low at 0.6049 marked on Tuesday, recovering the losses and trading around 0.6080 during the European session on Wednesday. In the absence of the high-impact data from New Zealand, low-impact data showed better-than-expected results, which could have added support to underpinning the New Zealand Dollar (NZD), which in turn, acted as the tailwind for the NZD/USD pair.

Statistics New Zealand showed that Electronic Card Retail Sales grew by 1.6% YoY in January, against the previous decline of 0.6%. The monthly data also printed a positive reading of 1.7% in comparison with the previous month’s 1.7% decline. Furthermore, the Food Price Index (MoM) improved to 0.9% from the decline of 0.1% in December.

The US Dollar Index (DXY) holds firm near three-month highs, trading around 104.90 despite the downbeat US bond yields. The 2-year and 10-year yields on US Treasury notes stand lower at 4.60% and 4.28%, respectively, by the press time.

According to the FedWatch tool, the market sentiment has undergone a notable transformation, with the probability of an unchanged interest rate next month soaring to 90%, a stark shift from just a month ago. Traders are currently pricing in a 37% probability of a 25 basis points (bps) rate cut by the Federal Reserve in May, with the probability increasing to 51% for June.

The surprise increase in US inflation for January has led analysts at Commerzbank to reevaluate the potential for the Fed to pivot toward interest rate cuts. Observers are speculating about whether the previously anticipated interest rate cut by the Fed in May might now face uncertainty in light of these developments.