FX.co ★ New Zealand Dollar Extends Gains

The New Zealand dollar appreciated to approximately $0.578, building on the gains achieved in the previous session, aided by a decline in the US dollar. The US dollar softened following renewed tariff threats from the United States targeting several European nations, which benefited the kiwi by allowing it to strengthen amidst prevailing global trade uncertainties. Simultaneously, investors have been closely evaluating the timing for potential interest rate hikes by the Reserve Bank of New Zealand. Recent economic data highlights improving economic momentum, with enhanced manufacturing activity, stronger labor market conditions, and increased business confidence, all of which bolster the anticipation that the central bank might start tightening its policy later this year. Traders are currently pricing in over a 50% likelihood of a rate hike in September, with a complete adjustment anticipated by October. Attention has now shifted to the Q4 inflation report, due later this week, which is expected to show that the annual inflation rate will remain at its highest level in a year, further supporting the argument for policy tightening.