- The NZD/USD pair broke above 0.6295, its highest level since May 23.
- US CPI fell to 3% yoy vs. 3.1% forecast, fueling US Treasury yields lower.
- The RBNZ held rates steady, as expected.
On Wednesday, the pair NZD/USD gained momentum on the back of weak inflation figures from the Consumer Price Index (CPI). In reaction, the US DXY index fell to lows not seen since 2022 due to falling US yields, giving the New Zealand asset room to rise.
US reported weak CPI figures while RBNZ paused
The US Bureau of Labor Statistics reported that the US Consumer Price Index fell to 3% yoy versus 3.1% expected from its last reading of 4%, while core inflation fell to 4.8%. YoY vs 5% expected from 5.3%.
In reaction, US Treasury yields fell sharply across the board. The 2-year yield fell 3.20% to 4.72%, the 5-year yield to 4.09%, down 3.38%, and the 10-year yield to 3.90%, down 2.00% on the day. As lower bond yields tend to weaken the local currency, the USD, as measured by the DXY, fell back to its lowest level since April 2022, down to 100.80, down 0.85% on the day. Attention now turns to the Federal Reserve (Fed) Beige Book due to be released later in the session.
The Reserve Bank of New Zealand (RBNZ) held rates steady at 5.5% for the first time since the tightening cycle began in 2021. The Bank noted that high interest rates are “constraining spending and inflation as expected and necessary”, indicating that they are confident that the rates that remain at a restrictive level of inflation will return to their objective. However, the Bank did not update its macroeconomic forecasts, nor did Governor Orr hold a press conference.
According to World Interest Rate Probabilities (WIRP), markets are pricing in just a 10% chance that the RBNZ will raise rates in August and a 25% and 50% chance that it will do so in October and November, respectively.
NZD/USD Levels to Watch
According to the daily chart, the NZD/USD pair has confirmed a short-term bullish outlook. As for the convergence of the 20, 100 and 200 SMAs at 0.6170-0.6190, the pair managed to consolidate above, and the 20-day SMA is about to make a bullish crossover with the 200-day SMA that could give more support to the Kiwi.
Support levels: 0.6220, 0.6190 (100-day SMA), 0.6180 (200-day SMA).
Resistance levels: 0.6385 (May highs), 0.6420, 0.6450.
NZD/USD Daily Chart
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Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
