- The NZD / USD gained strong positive traction on Friday in reaction to a stronger CPI report from New Zealand.
- A dovish USD demand continued to support the bullish move amid a positive risk tone.
- As US bond yields bounced, upbeat US retail sales data did little to impress USD bulls.
- The nervousness of COVID-19 kept any out-of-control rally limited for the pair, at least for now.
The pair NZD / USD it extended its sideways consolidation price action throughout the early American session and remained confined to a range just above the key psychological level of 0.7000.
Following the sharp pullback the day before from the 0.7045 region, or during the week highs, the NZD / USD pair regained positive traction on the last trading day of the week. New Zealand’s stronger consumer inflation report for the second quarter, coupled with subdued demand for US dollars, provided a good boost to the pair.
In fact, New Zealand’s headline CPI posted the fasting rise for nearly a decade and accelerated to 3.3% in the quarter ending in June. Against the backdrop of an aggressive surprise from the Reserve Bank of New Zealand earlier this week, the data further reaffirmed bets for an interest rate hike at the August monetary policy meeting.
On the other hand, a generally positive tone in equity markets undermined the safe-haven US dollar and extended some additional support to the perceived riskier kiwi. USD bulls ignored a sharp rally in US Treasury yields and also didn’t seem impressed by upbeat monthly US retail sales figures.
The US Census Bureau reported that the total value of retail sales increased 0.6% in June, beating consensus estimates that point to a 0.4% decline. Excluding automobiles, underlying retail sales rose 1.3% month-on-month for the reported month, although they did not give the dollar any boost.
A downward revision of the already weaker readings from the previous month appeared to be the only factor preventing the USD bulls from making bets. However, the data did little to dampen expectations that the Fed will adjust its policy sooner rather than later. This, in turn, benefited the USD and limited the gains of the NZD / USD pair.
Meanwhile, investors remain concerned that the spread of the highly contagious Delta variant of the coronavirus could derail the global economic recovery. This was seen as another factor that contributed to keeping any significant rises for the NZD / USD pair in check, justifying the caution of aggressive bull traders.