NZD/USD retests Asia’s highs ahead of FOMC minutes

• US core inflation beats expectation and meets Fed’s target.
• The FOMC minutes will be released at 18:00 GMT. 

As the Fed reaches its 2% inflation target, this is potentially bullish for the US Dollar. With inflation at, or above the target, the Federal Reserve Bank will now be more inclined to hike three more times this year. Lower inflation seen in recent months was mainly due to cell phone data pricing. The weaker US Dollar should also drive the prices to the upside in the coming months and core inflation should accelerate in 2018. The wages should also increase as the skill shortages rise in the job market.

“We think this makes it all the more likely that the Fed will hike three more times this year, although policymakers will also be watching closely to see how the recent trade escalations play out over the next few weeks.” According to James Smith, Economist at ING.

Investors will now be focusing on the widely awaited FOMC minutes’ report which will reveal the details of the last Fed’s meeting. High volatility can be expected at the time of the release which is scheduled at 18:00 GMT. 

Meanwhile, in New-Zealand, RBNZ Assistant Governor McDermott will speak on inflation at 23:00 GMT. A little before that, low-tier data, Electronic Card Retail Sales in March, will be released at 22:45 GMT. The news is unlikely to change the overall picture as the market will mainly focus on the FOMC minutes report and the general market sentiment.      

NZD/USD 4-hour chart

The NZD/USD broke above 0.7355 swing high made on March 13. The market is currently consolidating close to the highs made earlier in Asia at 0.7377. Support lies at 0.7346 and at 0.7323 swing high.