NZD/USD moves above 0.6050, upside seems limited due to easing inflation in New Zealand

• NZD/USD may face headwinds as the recent easing of inflation strengthens the case for the RBNZ's rate cut in November.
• New Zealand's Consumer Price Index rose 2.2% YoY in the September quarter, bringing inflation within the RBNZ's 1-3% target range.
• The US Dollar appreciates as strong US labor and inflation data have faded the odds of the Fed's aggressive rate cuts.

NZD/USD breaks its three-day losing streak, trading around 0.6070 during the Asian hours on Thursday. However, the upside for the AUD/USD pair could be limited by recent data showing that inflation in New Zealand has slowed to its lowest level in over three years. This has increased the likelihood of the Reserve Bank of New Zealand (RBNZ) reducing interest rates at its next monetary policy meeting in November.

New Zealand's Consumer Price Index (CPI) rose 2.2% year-over-year in the September quarter, down from the 3.3% annual increase in the previous quarter. "For the first time since March 2021, annual inflation is within the Reserve Bank of New Zealand's (RBNZ) target range of 1% to 3%. Prices are still increasing but at a slower rate than before," said Nicola Growden, consumer prices manager at Stats NZ.

Market participants are likely to remain cautious ahead of key economic data from China, New Zealand's top trading partner, scheduled for release on Friday. This includes GDP and Retail Sales data, following the recent disappointment in China's CPI and PPI figures.

The New Zealand Dollar (NZD) faced challenges as China's recently announced fiscal stimulus plan did little to lift market sentiment, as investors remain uncertain about the scale and impact of the package.

The US Dollar (USD) found support from strong labor and inflation data, which has tempered expectations for aggressive easing by the Federal Reserve (Fed). According to the CME FedWatch Tool, there is currently a 92.1% probability of a 25-basis-point rate cut in November, with no expectation of a larger 50-basis-point reduction.

Traders are keenly awaiting the US Retail Sales data, set to be released later in the North American session. Expectations are for monthly consumer spending to increase by 0.3% in September, up from 0.1% in the previous reading.