- NZD/USD tumbled after US CPI rose more than estimated, further cementing a big Fed rate hike.
- August inflation in the US showed signs of being stronger than expected.
- Traders await the NZ current account along with the US PPI on Wednesday.
The NZD/USD sank more than 100 pips, or 2%, during the North American session on Tuesday, spurred on by a US inflation reading that favors the US Federal Reserve in raising interest rates. interest at 75 basis points at the September 20-21 meeting. This, coupled with rising US Treasury yields and a strengthening greenback, triggered a surge in risk aversion.
The kiwi started trading around 0.6140 and approached the daily high of 0.6161. However, when US economic data was released, NZD/USD fell to a daily low of 0.6009 before paring some of its late losses. At the time of writing, the NZD/USD is trading at 0.6007, down 2.12%.
NZD/USD fell after the elevated US CPI.
The US Labor Bureau (BLS) reported that August inflation rose 0.1% mom, more than market participants’ estimates of a 0.1% contraction, while in annual terms, reached the threshold of 8.3%, also exceeding expectations. The so-called basic Consumer Price Index (CPI), which excludes food and energy, rose 0.6% month-on-month, up from 0.3% in July, due to rising rents and medical expenses, according to reports the BLS. The core CPI year-on-year rose 6.3%, up from 5.9% in July.
On the other hand, market participants have fully priced in a 75 basis point rate hike next Wednesday at the FOMC meeting, while the odds of a 100 basis point hike have risen to 20% via the tool. CME FedWatch.
Meanwhile, the US Dollar Index, which measures the dollar’s performance against a basket of peers, rose more than 1% to 109,606, supported by rising US Treasury yields, as the yield of the 10-year Treasury bonds, which stands at 3.447% and gains about 9 basis points.
In New Zealand, the ANZ house price index fell 1.3% mom in August, while adjusted sales posted a solid 4.9%. Later in the day, New Zealand’s economic docket will reveal current account data for the second quarter.
In the United States, the producer price index (PPI) for August will be published, with a forecast of -0.1% MoM, while the core PPI is expected to be 0.3%.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
