NZD/USD remains on the defensive above the 0.6100 mark, focus on US PCE data

• NZD/USD loses ground near 0.6109 on the firmer USD.
• US GDP data in Q4 was stronger than markets or the Fed expected.
• New Zealand’s CPI inflation was in line with expectations in the fourth quarter.
• The USCore Personal Consumption Expenditures Price Index (Core PCE) will be in the spotlight on Friday.

The NZD/USD pair trades on a weaker note above the 0.6100 mark during the early Asian session on Friday. The stronger GDP growth number lends some support to the US Dollar (USD) and weighs on the NZD/USD pair. Investors will take more cues from the US Core Personal Consumption Expenditures Price Index (Core PCE) on Friday for fresh impetus. This event might trigger volatility in the market. At press time, the pair is trading at 0.6109, down 0.03% for the day.

The US GDP in Q4 came in better than expected, growing 3.1% YoY from 4.9% in the previous reading. The upbeat GDP growth number boosted hopes for a soft landing, which lifted the US Dollar (USD) broadly. Meanwhile, the weekly Initial Jobless Claims rose to 214,000 in the week ended January 20, the highest level in a month. Continuing Claims increased by 27K to 1.833M for the week ended January 13. The markets have priced in 51% odds of a quarter-point rate cut from the Federal Reserve (Fed) at its March meeting, up from 41% on Wednesday.

New Zealand’s CPI inflation was in line with expectations in the fourth quarter and hit its lowest level since the middle of 2021. However, inflation remains higher than the central bank is comfortable with, and the markets anticipate that the rate cuts from the Reserve Bank of New Zealand (RBNZ) won’t be on the table in the near term.

Looking ahead, market players will closely watch the Fed’s preferred inflation measure, the Core Personal Consumption Expenditures Price Index (Core PCE), due on Friday. The monthly and annual Core PCE are estimated to show an increase of 0.2% MoM and 3.0% YoY, respectively.