NZD/USD holds positive ground above 0.5650 on weaker US Dollar, lower US bond yields

• NZD/USD gains ground to near 0.5680 in Thursday's early Asian session.
• US PPI inflation rose at a stronger pace than expected in January.
• The RBNZ is expected to cut its OCR by 50 bps to 3.75% next week. 

The NZD/USD pair trades stronger to around 0.5680 during the early Asian session on Friday. The US Dollar (USD) weakens amid declining US yields across the curve and despite steady concerns over a global trade war. Later on Friday, the US Retail Sales will take center stage. 

The US Producer Price Index (PPI) increased in January, triggering the expectation that the US Federal Reserve (Fed) would not be cutting interest rates before the second half of the year. Financial markets have pushed back rate cut bets to September from June, though some economists believe the window for additional policy easing has closed due to solid domestic demand and a steady labor market.

"The Q1 RBNZ survey of inflation expectations leaves plenty of room for the RBNZ to deliver a 50bps cut to 3.75% next week. Firms' inflation expectations ns 2, 5 and 10 years out all dipped closer to 2%," said BBH's FX analysts. 

The Reserve Bank of New Zealand (RBNZ) is expected to cut interest rates by 50 basis points (bps) next week, bringing its Official Cash Rate (OCR) to 3.75%. The markets also anticipate a further 75 bps of reduction this year. The dovish expectation from the RBNZ might drag the Kiwi lower against the USD.