- NZD/USD fell after US CPI rose higher than estimated, further cementing the Fed’s big interest rate hike.
- August US inflation flashed signs of being stickier than expected.
- Traders await NZ Current Account along with US PPI on Wednesday.
NZD/USD sank more than 100 pips or 2% during the North American session on Tuesday, spurred by hot US inflation that supports the case for a 75 bps rate hike on the 20-21 session. September. That, along with higher U.S. Treasury yields and a stronger dollar, created an impetus for risk aversion.
The Kiwi started trading around 0.6140 and approached the daily high at 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 this article NZD/USD is trading at 0.6007, down 2.12%.
NZD/USD falls after US CPI rises
The U.S. Bureau of Labor Statistics (BLS) reported August inflation rose 0.1% month-on-month, topping market participants’ estimates of 0.1%, while reaching 8.3% year-on-year, also beating expectations. The so-called core Consumer Price Index (CPI), which excludes food and energy, rose 0.6% month-on-month, above July’s 0.3%, due to a higher rent and health care index, according to the BLS. Year-on-year core CPI rose 6.3%, up more than 5.9% in July.
Elsewhere, market participants fully priced in a 75 bps rate hike next Wednesday at the FOMC meeting, while odds of a 100 bps increase rose to 20% via the CME FedWatch Tool.
Meanwhile, the U.S. dollar index, which measures the greenback’s performance against a basket of peers, recovered more than 1% to 109.606, supported by higher yields on U.S. Treasuries, such as the benchmark 10-year bond rate at 3.447%. with a gain of almost 9 bps.
On the New Zealand side, the ANZ House Price Index fell 1.3% month-on-month in August, while adjusted sales printed a solid 4.9%. Later in the day, New Zealand’s economic paper will reveal current account data for the second quarter.
The US economic report will include the producer price index (PPI) for August on Wednesday, with the headline forecast at -0.1% month-on-month, while the core PPI is expected at 0.3%.