,

USD stages comeback as markets worry about Fed

Kiwi collapses on expectations data.

US data signals Fed might need more hikes

The US dollar surged higher on Friday, completing its strongest week since February, after the University of Michigan’s consumer sentiment saw confidence fall to a six-month low but long-term inflation expectations jumped to the highest level since 2011.

While the one-year inflation expectations reading fell from 4.6% to 4.5%, the five-year reading climbed from 3.0% to 3.2%. The increase in US inflation expectations makes further US rate hikes more likely.

The USD’s recovery last week was most impressive versus the European currencies. For example, the EUR/USD is now down 2.2% from its recent highs. The Aussie was weaker with the AUD/USD down 0.8% on Friday as it fell back towards

Kiwi collapses on expectations data

The inflation story was entirely different in New Zealand, where a sharp drop in inflation expectations caused the NZD to tumble on Friday.

Inflation expectations fell from 3.3% to 2.79% — the first time this reading has been below 3.00% since the September quarter of 2021.

The NZD/USD fell 1.8%.

The kiwi was lower in all other major markets with the NZD/EUR down 1.1% and the NZD/AUD down 0.9%.

RBA minutes in focus

The early focus this week will be the Reserve Bank of Australia minutes on Tuesday as markets try to get a grip on the RBA’s thinking after April’s surprise decision to hold rates steady and May’s surprise decision to hike to 3.85%.

Also on Tuesday, Chinese monthly activity data, including industrial production and retail sales, are due. China data has recently weakened with poor trade and inflation releases last week pushing the Chinese yuan lower. However, credit growth has been strong, in what can be a leading indicator for the AUD.

Later in the week, US retail sales will be the major US release. 

Kiwi hit on inflation data

Table: seven-day rolling currency trends and trading ranges

Key global risk events

Calendar: 15 – 19 May

All times AEST

Have a question? [email protected]

Get the latest currency and FX news

Subscribe to receive monthly insights, daily reports, and more — empowering you to navigate global commerce and FX strategy.