NZD/USD pulls away from multi-month highs, trades above 0.67
- Inflation in New Zealand rises to 0.6% in the second quarter.
- US Dollar Index climbs above 97, erases last week's gains.
- Retails sales data and Fedspeak will be watched closely in the second half.
Boosted by the upbeat GDP and retail sales data from China, the NZD/USD pair started the week on a strong note and advanced to its highest level since mid-April at 0.6738 during the Asian trading hours on Tuesday but struggled to preserve its bullish momentum.
The data published by the Statistics New Zealand today revealed that the Consumer Price Index (CPI) in the second quarter came in at 0.6% on a quarterly basis following the previous quarter's reading of 0.1% and improved to 1.7% on a yearly basis from 1.5%. Although these numbers came in line with the market expectation, they didn't seem to be strong enough to force the Reserve Bank of New Zealand to refrain from making a rate cut.
Commenting on the data, "This outcome should do little to alter expectations for the Bank to cut next month following a series of poor PSIs and PMIs that suggest NZ will get sub 2% growth," TD Securities analysts noted. "In terms of details, the 5.8%/q rise in fuel prices led the increase in headline inflation and rents rose +1%/q, the fastest pace since 2008.”
However, with the greenback continuing to recover the losses it suffered last week, the pair reversed its course and erased almost all of its daily gains.
Despite a lack of fundamental drivers, the US Dollar Index broke above the 97 mark and pushed higher ahead of retail sales data and speeches by FOMC members Bostic, Evans, and Chairman Powell. At the moment, the DXY is up 0.3% on a daily basis at 97.22.
Technical levels to watch for