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Market News NZD/USD bears pile in as the dollar strengthens

NZD/USD bears pile in as the dollar strengthens

NZD/USD bears enter the market as the greenback recovers. The RBA will be a significant event for Asia, as traders anticipate further Fed hints from this week's US CPI.

Alina Haynes
2022-06-07
722

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NZD/USD is offered in the Tokyo morning as the US dollar gains on previous resistance as represented by the DXY index on the daily chart. The kiwi is 0.36 percent down at 0.6466 and has declined from a high of 0.6493 to a low of 0.6460. The U.S. dollar continues to advance versus a basket of foreign currencies despite a decline in risk appetite from previous levels.

 

Prior to a major inflation measurement later in the week and today's meeting of the Reserve Bank of Australia in Asia, US equities closed significantly below their previous highs last night, boosting the attraction of the safe-haven. However, the benchmarks were able to conclude the day in the green after paring previous gains, while solar businesses rose after the Biden administration announced a two-year reprieve from tariffs for solar imports from four Southeast Asian nations.

 

The Dow Jones Industrial Average rose sharply to 32,915.78 while the S&P 500 gained 0.3% to 4,121.43 and the Nasdaq Composite gained 0.4% to 12,060.67. After reaching a near 20-year high of 105.01 on May 13, the US dollar index (DXY) has retreated to about 102, despite the fact that Friday's robust payrolls data helped the dollar post its first weekly gain in three weeks, and we are witnessing a continuation of this trend on Tuesday in Asia. The index has risen 0.20 percent to 102.62.

 

Ahead of the Federal Reserve's policy statement on June 15, when it is largely anticipated that the central bank will hike rates by 50 basis points, investors will closely monitor the Consumer Price Index data and search for indications as to how long the Fed may need to continue rising rates.

 

TD Securities analysts explained: "Core prices presumably remained solid in May, with the series reporting a second straight 0.5 percent MoM gain." "Used car prices have been a drag on inflation in previous months, but we now anticipate them to contribute, rising for the first time in four months. We also anticipate ongoing growth in airfare and housing inflation. Our m/m predictions suggest an 8.4% /5.9% YoY increase in total/core pricing.

 

Domestically, this week, traders will be watching for the first quarter manufacturing data on Friday, but analysts at ANZ Bank argued "that isn't likely to disturb markets all that much, so the Kiwi is likely to continue to move on global themes, with the RBA decision this afternoon (our AU team anticipates a 40bp hike to 0.75 percent)"

 

"This week's ECB meeting is crucial, as is the fact that WTI crude oil is back up around record highs, in our opinion (adding to pain as well as inflation pressures via the fuel pump). A formula for instability? Maybe.''


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