As Tuesday’s European session begins, the New Zealand dollar has dropped from its three-week highs in the 0.6215-10 range. The kiwi pair is fighting to maintain its three-day rise in the run-up to Wednesday’s Reserve Bank of New Zealand (RBNZ) Interest Rate Decision and US June CPI data.

As market participants fretted over weak US inflation statistics and the Fed’s rate hikes, the US Dollar dropped to a two-month low of 101.75 by press time on Monday following Friday’s lackluster US jobs report.

Inflation predictions among US consumers dropped to 3.8% in June from 4.1% in May, according to a monthly poll released by the New York Federal Reserve (Fed) on Monday. The US dollar fell the most in three weeks as US nonfarm payrolls fell for the first time in 15 months.

NZD/USD purchasers were buoyed by Monday’s sluggish China inflation and market worries over the RBNZ’s inaction following consecutive rate hikes since October 2021.

The S&P 500 futures ranged between 4,445 and 4,448 during the day, a gain of 0.05% from the previous day as investors sought to build on the last session’s rebound from the index’s lowest point since June 29. US Treasury bond yields have not recovered from Monday’s spike to the highest level since March. The yield on benchmark US 10-year Treasury bonds declined for the first time in July the day before, falling to 3.99%, and the work on benchmark US 2-year Treasury bonds fell for the second day in a row, falling to 4.85%.

Next, NZD/USD bulls before the RBNZ may get a boost from hawkish Fed talks, a light calendar, and the US-China confrontation. If New Zealand’s central bank boosts rates by even 0.25 percentage points, the kiwi pair may rise toward the late May swing high. But even if it doesn’t, the weak inflation numbers in the US can back up the quote.

Trade Idea:

The kiwi pair is currently trading near three-week highs, and it could continue to rise if the RBNZ raises rates on Wednesday. However, even if the RBNZ does not raise rates, weak US inflation data could still support the pair.

Overall, the outlook for NZD/USD is optimistic ahead of the RBNZ and US CPI data. Traders should be prepared for a volatile market, but there is potential for the Kiwi pair to rally.