The New Zealand dollar fell in European trade against its US counterpart, after a hiatus from losses in recent days away from five-week lows, after data showed lower inflation forecasts for the next two years. 

Such forecasts raised more doubts about the pace of interest rate hikes by the Reserve Bank of New Zealand next week. 

The kiwi fell 0.4% against US dollar to 0.6329, with a session-high at 0.6366. 

The Kiwi rose 0.8% yesterday, the second profit in three days as the greenback dropped, with the New Zealand dollar climbing off five-week lows at 0.6270. 

Inflation Outlook

Recent official data showed the outlook for two-year inflation down 32 points to 3.30% from 3.62%. 

Such an expected decline would reduce pressure on the RBNZ and in turn hurt the Kiwi's standing. 

New Zealand Rates

Such outlook reduced chances of a 0.5% rate hike by the Reserve Bank of New Zealand next week. 

Forecasts for 2023

ASB, one of New Zealand's largest banks, expects kiwi to rise during the first half of the year before turning to losses in the second half. 

The analysts expect a real possibility of short-term gains for the local currency amid global momentum in favor of kiwi. 

As risk appetite improves and the Chinese economy reopens and global growth outlook rebounds, the New Zealand dollar will continuing receiving support. 

The kiwi is also expected to gain momentum against yen, considered a safe haven, and maintain its strength against euro and the British pound, before giving up some ground in the long term.

Gold prices rose in European trade on Tuesday, holding above six-week lows as the dollar gave up ground against a basket of major rivals. 

Dollar's decline comes ahead of US inflation data later today, which will showcase the inflationary pressures on Fed policymakers, and will set up new pricing for rate hikes in March.

Gold Prices Today

Gold prices rose over 0.6% to $1,864 an ounce, with a session-low at $1,953. 

Gold prices lost 0.6% yesterday, the second loss in three days, hitting six-week lows at $1,850. 

The Dollar

The dollar index fell 0.3% today, extending the losses for the second straight session against a basket of major rivals. 

Dollar's decline makes dollar-denominated gold futures cheaper to holders of other currencies.

The dollar dipped as US 10-year treasury yields dipped as well for the second day, reducing chances for investments in dollar.

Fed Rates

Current pricing for a 0.25% rate hike by the Federal Reserve in March stands at 88%, and 68% for a similar hike in May.

US Inflation

US consumer prices are expected up 6.2% in January, slowing down from 6.5% in December.

Several Fed policymakers noted the need for more rate hikes to reduce inflation to the 2% target. 

Estimates

If US data showed continued strength in inflation, it'll bolster the case for several more Fed rate hikes, in turn boosting the dollar and hurting gold's standing. 

The SPDR

Gold holdings at  the SPDR Gold Trust remained flat yesterday at 920.79 tones. 

Will Gold Prices Mark Strong Gains This Week?

If inflation indeed slowed down in the US for the seventh straight session, pricing for Fed rate hikes will decline as well, in turn hurting dollar and treasury yields and boosting gold prices above $1,900 once more. 

Global markets await major US inflation data later today for January, crucial for pricing upcoming Federal Reserve rate hikes in March and beyond. 

Latest inflation data showed prices slowed down for the sixth straight month, hitting October 2021 lows in positive news for the global markets, which boosted risk appetite.

Will today's data similarly show another slowdown in inflation? we try to analyse this issue in t his report, and its potential impact on policy and the dollar.

Most economists do expect US inflation to slow down for the seventh straight month, confirming the vision that inflation peaked back in June and it's taking a downward direction now. 

US Inflation

US consumer prices are expected up 6.2% in January, slowing down from 6.5% in December. 

Fed Rates

Current pricing for a 0.25% rate hike by the Federal Reserve in March stands at 88%, and 68% for a similar hike in May.

Fed Rates Estimates

Naturally, if data confirmed a slowdown, it'll show the economy is responding to policy tightening by the Fed, and it might drive pricing for a 0.25% hike in March to below 50%.

However if inflation was higher than expected, a rate hike in March will be all but certain, with a certain one in May as well. 

The Dollar

Dollar will react similarly, strengthening with stronger prospects for rate hikes, and weakening otherwise, possibly going near recent ten-month lows.

Yen rose in European trade against a basket of major rivals off week lows after the Japanese government chose economic expert Kazuo Ueda as the new Bank of Japan governor as the current holder of the position, Haruhiko Kuroda, will finish his term in April.

In Europe, investors await important fourth quarter inflation and unemployment data, which will provide fresh clues on the health of the European economy and the path ahead for policies. 

EUR/JPY fell 0.4% to 141.52, with a session-high at 142.11, after rising 1.2% yesterday, marking one-week highs at 142.38 away from three-week lows at 139.55. 

Kazuo Ueda

The Japanese government chose economic expert Kazuo Ueda as the new Bank of Japan governor as the current holder of the position, Haruhiko Kuroda, will finish his term in April.

Ueda is aged 71 years old, and will be the first BoJ governor with an academic background, after getting his Doctorate from MIT and becoming an economics professor in the Tokyo University, while also working for the Bank of Japan board between 1998 and 2005.

Ueda still has to attend Parliament meetings later this month for his appointment to be official as lawmakers quiz him for his monetary policy plans.

Ueda is not yet known whether he's bullish or bearish in his policy tendencies, with analysts mostly expecting him to maintain the current ultra easy policies of his predecessor. 

European Data

Now investors await important European data later today, with GDP growth estimates at 0.1% in the euro zone in the fourth quarter, same as the third quarter. 

Strong data will underpin the European Central Bank's plans to continue hiking interest rates by an aggressive pace following the March meeting.