NZD/USD steadies around 0.6300 ahead of RBNZ inflation expectations

• NZD/USD seesaws near Wednesday’s open after a 100-pip move.
• US inflation crossed forecasts in April, justifying hawkish Fedspeak and firmer USD.
• NZ FinMin Robertson signals short-term inflation pressure at home.
• China’s covid conditions, geopolitical tensions add to the bearish bias ahead of a busy calendar in Asia.

NZD/USD revisits the 0.6300 mark, completing a home round after almost 100 pips of the inflation-induced move, as the pair traders await a set of key data from New Zealand during early Thursday morning in Asia. Also likely to have restricted the Kiwi pair’s moves are mixed concerns amid firmer US CPI and zigzag moves of yields, not to forget risks emanating from China and Russia.

The much-awaited US Inflation data rose past market consensus but the traders sought solace in softer-than-previous releases. That said, the headline Consumer Price Index (CPI) rose to 8.3% YoY versus 8.1% expected and 8.5% prior. More importantly, the CPI ex Food & Energy, better known as Core CPI, crossed 6.0% forecasts with 6.2% annual figures, versus 6.5% previous readouts.

It should be noted, however, that the Fedspeak remained hawkish and renewed US dollar strength just after an initial drop. That said, Federal Reserve Bank of St. Louis James Bullard recently mentioned that he ''won't emphasize single inflation report too much but inflation is more persistent than many have thought.''

At home, New Zealand Finance Minister (FinMin) Grant Robertson praised the nation’s economic strength in a pre-budget speech while also highlighting inflation as a short-term challenge. The policymaker also expects the price pressure to ease in the second half of the year.

On a different page, global markets dwindled as equities initially rose before ending in the red while the US Treasury yields also rose past 3.0% before ending Wednesday at a one-week low of 2.92%.

It’s worth observing that China’s struggle with covid and Europe’s readiness for the sixth round of sanctions on Russia are extra catalysts that weigh on the market sentiment, in addition to the inflation fears. The same exerts downside pressure on the NZD/USD prices ahead of the key Q2 Inflation Expectations from the Reserve Bank of New Zealand (RBNZ), previous 3.27%.

“The RBNZ will be hoping to see some moderation in inflation expectations measures – especially at the longer horizons. That would give them some leeway to slow down the pace of rate hikes after what we expect will be another 50bp hike to 2% on 25 May,” said Australia and New Zealand Banking Group (ANZ) ahead of the data release.

Other than the RBNZ Inflation Expectations for Q2, US Jobless Claims and Producer Price Index (PPI) will also be important to watch for immediate directions.

Technical analysis

Given the pair’s failure to rebound from a two-year low, NZD/USD prices are likely bracing for October 2019 low surrounding 0.6200.

Meanwhile, multiple lows marked during mid-2020, around 0.6380-85, restrict immediate recovery moves.