NZD/USD holds positive ground above 0.6250, US PCE inflation data looms

• NZD/USD trades in positive territory around 0.6260 in Friday's early European session.
• The upbeat US GDP growth report supports the USD, but higher Fed rate cut bets might cap its upside. 
• The optimism in New Zealand's business confidence boosts the Kiwi. 

The NZD/USD pair extends the rally near 0.6260 during the early European session on Friday. The pair is set to close weekly gains for the fifth consecutive week, bolstered by firmer speculation that the Federal Reserve (Fed) will start easing its monetary policy in September. The release of the US Personal Consumption Expenditure (PCE) inflation data will be in the spotlight on Friday. 

The US economy grew at an annualized rate of 3.0% for the second quarter (Q2) from 2.8% in the initial estimate, the Bureau of Economic Analysis (BEA) showed Thursday. This figure came in stronger than the expectation of 2.8%. Meanwhile, the number of Americans filing new applications for jobless benefits for the week ending August 24 dropped to 231,000 from 233,000 in the previous week, below the consensus of 232,000. 

The encouraging US economic data on Thursday provides some support for the Greenback. However, the upside seems limited as traders anticipate the US Fed to lower its borrowing costs next month. The rate futures markets have priced in around 66% odds of a 25 basis points (bps) rate cut in September, but the chance of a deeper rate cut stands at 34%, down from 36.5% before the US GDP data, according to the CME FedWatch Tool.

Investors will take more cues from the key US inflation data, which is due later on Friday. Any signs of elevated inflation in the US economy could dampen the hope for a Fed rate cut in September. This, in turn, might support the USD and cap the upside for NZD/USD. On Thursday, Atlanta Fed President Raphael Bostic said that there is still a distance to go on inflation. Bostic added that the central bank should wait for more employment and inflation report data before cutting rates.  

On the Kiwi front, the recent New Zealand's ANZ Business Outlook survey, which climbed to its highest level in a decade, boosts the New Zealand Dollar (NZD). The headline business confidence measure in the survey jumped to 51.0 in August, while the expected own activity measure surged to a seven-year high of 37.0.