Following conflicting news from China, the NZD/USD pares intraday losses around the lows.
China’s second-quarter GDP fell on a year-over-year basis but increased more than predicted on a quarter-over-quarter basis, while monthly retail sales and IP data also improved.
The risk-off mentality helps DXY, putting extra downward pressure on kiwi prices.
The important to follow will be the RBNZ’s hawkish tests of sellers, covid updates, and reflation difficulties.
NZD/USD is hovering around 0.7013, down 0.27 percent on the day, in the early hours of Thursday. As the market’s sluggish sentiment battles mainly firmer data from important client China, the Kiwi pair consolidates the previous day’s gains, which were the largest in three months.
China’s second-quarter (Q2) GDP growth surpassed the 1.2 percent projection to 1.3 percent quarter-on-quarter, but fell short of the 8.1 percent YoY forecast to 7.9 percent. Furthermore, June Retail Sales and Industrial Production (IP) increased by more than 7.8% and 11.0 percent YoY, respectively, to 8.3 percent and 12.1 percent.
Read: China’s GDP expands 7.9% YoY in Q2 2021, compared to 8.1 percent predicted, and the AUD/USD falls to new lows
In addition to the conflicting data, negative sentiment fueled a safe-haven bid for the US dollar, putting downward pressure on the NZD/USD exchange rate.
The risk appetite is being weighed down by worsening coronavirus (COVID-19) conditions in Australia and elsewhere in Asia-Pacific, as well as fears of an extended pandemic. “Vaccine shortages mean several countries in East Asia and the Pacific may not fully vaccinate their populations until 2024,” World Bank Group President David Malpass warned recently, according to Reuters.
It should be noted, however, that the Reserve Bank of New Zealand’s (RBNZ) hawkish stance the day before, as well as the market’s lack of faith in Fed Chair Jerome Powell’s pessimistic words defending cheap money, appear to have put the NZD/USD sellers to the test by press time.
However, S&P 500 Futures are down 0.15 percent on the day, while US 10-year Treasury rates are down two basis points (bps) to 1.33 percent at press time. Furthermore, the US dollar index (DXY) consolidates its losses from the previous day at 92.40, up 0.05 percent.
The second round of Powell’s testimony, as well as second-tier US data, such as the Philadelphia Fed Manufacturing Index and weekly Jobless Claims, will adorn the calendar ahead of Friday’s crucial New Zealand inflation report. Meanwhile, the NZD/USD bears may be entertained by the covid headlines and reflation talk. A robust CPI will confirm the RBNZ’s optimistic bias and perhaps bring back the buyers who ruled on Wednesday.
Failure to breach the 200-day EMA decisively, combined with the RSI divergence, keeps NZD/USD sellers hopeful of revisiting the 0.6920 critical support zone, which contains the yearly bottom./n
