NZD/USD sustains below 0.6300 on souring market mood, US Inflation eyed

• NZD/USD is balancing below 0.6300 as fears of a recession in the kiwi zone renew.
• Investors are on the sidelines ahead of the US inflation numbers.
• The BNZ sees NZ’s economic development to halt in 2023.

The NZD/USD pair is falling like a house of cards as risk-perceived securities are being dumped by the market participants as uncertainty over the US inflation release is looming in the FX domain. The asset has been dragged below 0.6300 on expectations of higher inflation figures that will force the Federal Reserve (Fed) to feature a jumbo rate hike consecutively.

The street is also expecting that the Fed could announce a 75 basis point (bps) interest rate hike in June. Although it seems contradictory to the dictation of Fed chair Jerome Powell that a 75 bps rate hike is not into consideration. No wonder the renewal of the multi-decade inflation could leave no other choice for the Fed than to soar the interest rates.

As per the market consensus, the yearly CPI figure is seen at 8.1% while the core CPI that doesn’t include food and energy is seen at 6%. Meanwhile, the comments from Cleveland Fed President Loretta Mester states that the Fed won’t step back from the interest rate elevation program until it finds any compelling drop in the inflation numbers.

On the kiwi front, the situation seems worsened as the Bank of New Zealand (BNZ) has claimed that “New Zealand's economic development will come to a halt in 2023. It looks like higher inflation has started showing its colors now. The BNZ also stated that the risk of a recession in the kiwi area is increasing day by day. This may dent the demand for the antipodean further.