NZD/USD loses traction below 0.6150, focus on US CPI, Fed rate decision

• NZD/USD loses ground near 0.6140 on Wednesday. 
• A two-day FOMC meeting begins on Tuesday and ends on Wednesday with an expected hawkish hold. 
• The RBNZ’s hawkish stance might support the Kiwi against the USD in the near term.

The NZD/USD pair snaps the two-day winning streak around 0.6140 on Wednesday during the early Asian session. Markets turn cautious ahead of the key US events, which provide some support for the Greenback. The US Consumer Price Index (CPI) data and the FOMC monetary policy meeting will take center stage on Wednesday. 

The FOMC is widely expected to keep rates on hold at its June meeting as there was little progress on getting inflation moving back towards the 2% target. Markets see a 52% odds of a September cut from the Fed, while the chance of a November cut around 67%, according to the CME FedWatch tool.

Inflation in the United States showed signs of cooling in April after coming in hotter than expected in the first quarter of this year. Traders will keep an eye on the May CPI for more cues about the inflation outlook. In case the report shows that US inflation remains elevated in May, this might prompt speculation about Fed rate cuts this year and could boost the US Dollar (USD) broadly. 

Inflation in New Zealand remains above the Reserve Bank of New Zealand’s (RBNZ) 1-3% target band, although it is gradually moving down. However, the central bank is concerned about sticky domestic inflation and puts an increased chance of a future hike. The RBNZ’s new forecasts show an easing cycle starting in the third quarter of this year. The hawkish stance from the RBNZ is likely to underpin the New Zealand Dollar (NZD) and create a tailwind for the NZD/USD pair.