NZD/USD depreciates to near 0.6100 due to the improved US Dollar

• NZD/USD extends losses due to the upward correction in the US Dollar.
• Fed remains cautious about inflation and potential rate cuts in 2024.
• The New Zealand Dollar could draw some support from higher PPI inputs and outputs for Q1.

The NZD/USD pair extended its losses to near 0.6110 during the Asian session on Friday. This decline can be attributed to the recovery of the US Dollar (USD), which rebounded after hitting multi-week lows around 104.00 on Thursday.

The Federal Reserve (Fed) maintains a cautious stance regarding inflation and the potential for rate cuts in 2024. On Thursday, Fed Bank of Atlanta President Raphael Bostic emphasized the need for patience with interest rates, noting that substantial pricing pressure persists in the US economy.

Additionally, Cleveland Fed President Loretta Mester indicated that it might take longer than anticipated to confidently ascertain the inflation trajectory, suggesting that the Fed should maintain its restrictive stance for an extended period.

Furthermore, the US Department of Labor released the US Initial Jobless Claims on Thursday. The number of Americans filing new claims for jobless benefits rose to 222,000 for the week ending May 10, surpassing the market consensus of 220,000 but below the previous week's figure of 232,000.

On the Kiwi front, New Zealand's Producer Price Index (PPI) inputs and outputs increased in the first quarter. PPI input prices rose by 0.7% compared to the expected 0.7%. While PPI output prices increased by 0.9% against the expected 0.5%. These higher-than-expected PPI figures could provide some support for the New Zealand Dollar (NZD), potentially limiting the downside of the NZD/USD pair.

According to Stats NZ, the largest contributors to the rise in output prices were electricity and gas, which saw an 8.8% quarter-on-quarter increase. Energy costs also significantly impacted input prices, climbing 11.6%. Additionally, insurance costs substantially contributed to the increase in PPI input costs, rising by 5.0% quarter-on-quarter.