NZD/USD is 0.17% higher at the time of writing after moving up from a low of 0.6144 to a fresh high of 0.6161 in Tokyo trade. The focus is on the Federal Reserve today following Tuesday's inflation report that points to sticky core inflation. 

The data showed that the US Consumer Price Index edged up 0.1% last month after increasing 0.4% in April, core CPI increased 0.4% in May, rising by the same margin for the third straight month. However, the Greenback pared back initial knee-jerk losses as this is a number that is too high to be compatible with the Fed's 2% inflation target, thus there are still chances that the FOMC will justify another 25-bp rise at the outcome of the FOMC meeting.

''The Kiwi is up a touch this morning, and while it did endure a few ups and downs overnight through US CPI data, FX markets were far less volatile than bond markets, with the bellwether US 10-year Treasury bond trading a 15bp overnight range,'' analysts at ANZ Bank explained.

''Although US bond yields are now back up near late-May highs, that hasn’t helped the USD, in part because while the data has cemented the market’s call for a Fed ‘skip’ tomorrow, it also suggests we’ll see more tightening later, and that’ll ultimately slow the US economy,'' the analysts added.

As for the Fed, analysts at TD Securities said that they ''maintain our long-held view that the Fed will tighten rates by a final 25bp in June to a range of 5.25%-5.50%. If the Fed decides to 'skip' the June meeting, we expect the decision to be accompanied by communication that leans hawkish, signaling a likely hike in July.''

''Whether the Fed hikes in June or July (or skips both) the USD is focused on the near completion of the tightening campaign, skewing the risks towards a USD pullback in H2,'' the analysts argued.