Insights 
VT 
NZD/USD has shown an upward trend, approaching 0.5900, following an increase in the RBNZ Inflation Expectations for Q2. Expectations have risen to 2.29%, a jump from the previous 2.06%, reflecting anticipated annual CPI two years ahead.
The New Zealand Dollar has also benefited from reduced global trade tensions, with a US-China preliminary trade deal reached. This agreement includes the US reducing tariffs on Chinese goods from 145% to 30%, and China lowering tariffs on US imports from 125% to 10%.
us economy outlook
The US Dollar remains stable, amidst mixed recent US economic data. While the US Producer Price Index rose by 2.4% in April, this marked a slowdown from March’s 2.7%, and fell short of the projected 2.5%.
Core PPI saw an annual increase of 3.1%, decreasing from the previous 4%. On a monthly scale, headline PPI fell by 0.5%, while core PPI fell by 0.4%.
Initial Jobless Claims maintained at 229,000 for the week ending May 10, matching the previous week’s revised numbers. This data indicates both underlying economic resilience and a potential deceleration in growth momentum.
inflation and trade impacts
The recent strengthening of the New Zealand Dollar reflects a combination of shifting inflation expectations and improving external conditions. In particular, local market forecasts now anticipate consumer price inflation at 2.29% over a two-year horizon, up from 2.06%. This rise is not just a marginal adjustment – it is a material change in forward-looking sentiment and suggests that firms and consumers alike expect higher price pressures in the medium term. As expectations anchor monetary policy outlooks, this adjustment has underpinned NZD buying, driven largely by premises that the Reserve Bank may need to stay vigilant in its stance or, at the very least, avoid signalling an early pivot.
Concurrently, lower tariffs between the United States and China have alleviated some pressure in global trade corridors. Washington’s rollback from 145% to 30%, and Beijing’s trimming from 125% to 10%, moves the needle in terms of global risk appetite. For regions like New Zealand that are tightly linked to export flows and commodity trade, this softening in trade frictions indirectly supports currency strength. Reduced global uncertainty improves investor sentiment and boosts demand for higher-yielding or commodity-linked currencies.
Across the Pacific, however, the US Dollar holds steady amid a mix of data that neither strongly affirms growth nor suggests an outright slowdown. On the inflation front, wholesale prices, measured by the Producer Price Index, climbed 2.4% in April year over year, slipping slightly from March and just under the forecast of 2.5%. This pace – while still elevated – suggests pressures are easing slightly. More pointedly, the core PPI figure, which excludes volatile food and energy items, showed a yearly gain of 3.1%, a full percentage point lower than previously. Monthly figures showed clear deceleration, with headline and core falling 0.5% and 0.4% respectively.
These slowdowns carry weight when mapped onto interest rate expectations. Cooling input cost inflation often means less urgency for central banks to tighten further. That may slow USD demand, especially if upcoming data underperforms.
Hiring data remains flat, with initial jobless filings steady at 229,000 for the second consecutive week. From our perspective, this supports two competing narratives. Steady claims may imply continued labour market strength, which could act as a floor under income-driven spending trends. But it simultaneously indicates that gains have stalled at the margin, and any deterioration from here would shift sentiment quickly.
For positioning, we see scope for continued adjustment in relative monetary policy expectations. The modest rise in long-term New Zealand inflation forecasts raises the odds that policy there remains tight even as other developed markets potentially flirt with easing. This divergence supports moderate NZD outperformance in the near term, particularly against currencies tied to policy recalibration.
On technical setups, upside movement near the 0.5900 level reflects a market testing resistance thresholds. Should next week’s data reinforce the inflation story or confirm a weaker USD backdrop, we could see momentum extend with short-dated options pricing in more pronounced topside risk. Conversely, failure to break convincingly could revert direction quickly, especially with positioning now partially long.
Expect volatility around interim releases – a single downside surprise on jobs or inflation could trigger profit-taking. Accordingly, we favour strategies that hedge against choppy price action rather than commit aggressively to breakout structures. There is opportunity, but entries must be clean, and exits defined.
