NZD/USD sellers approach 0.6100 as US inflation renews recession fears

• NZDUSD takes offers to reverse the previous day’s gains.
• US CPI propelled odds of the higher Fed rate, recession.
• RBNZ’s repeated commentary, economic fears disappointed bulls.
• Second-tier US data may entertain traders, risk catalysts will be crucial for fresh impulses.

NZD/USD remains pressured around 0.6120, snapping the two-day rebound from the yearly low, as risk-aversion weighs on the Antipodeans during Thursday’s Asian session. The Kiwi pair’s latest weakness could also be linked to the Reserve Bank of New Zealand’s (RBNZ) failure to impress bulls even with the 50 basis points (bps) rate hike.

A 40-year high in the US inflation joined a larger-than-life rate hike from the Bank of Canada (BOC) propelled market fears of inflation and recession of late. That said, US Consumer Price Index (CPI) for June jumped to the highest level in 40 years to 9.1% YoY versus 8.8% expected and 8.6% prior. The Core CPI, which excludes volatile food and energy prices, eased to 5.9% from 6% prior but crossed analysts' forecast of 5.8%. It should be noted that the BOC announced a 100 bps rate hike by crossing the market forecasts the previous day.

Following the US data, White House (WH) Economic Adviser Brian Deese told CNBC that the CPI data shows the urgency for Congress to pass legislation to spur semiconductor manufacturing in the US, as reported by Reuters. On the other hand, US President Joe Biden mentioned that CPI data is ‘out of data’ as gas prices have fallen.

Recently, Richmond Federal Reserve President Thomas Barkin conveyed his support for higher rates in the last meeting. On the same line, Cleveland Federal Reserve President Loretta Mester also said, “The data on CPI does not suggest a rate hike in July any smaller than that in June.”

It should be noted that RBNZ matched market expectations of lifting the benchmark rates to 2.5% from 2.0% the previous day. However, the reason for the Kiwi pair’s pullback could be linked to the RBNZ Rate Statement as it said, “Committee noted that while there are near-term upside risks to consumer price inflation, there are also medium-term downside risks to economic activity,” per Reuters. It’s worth noting that the New Zealand central bank’s repeat of May’s Official Cash Rate (OCR) track of peaking just below 4.00% in 2023 also weighed on the NZD/USD prices after the release.

Amid these plays, the Wall Street benchmarks closed negative despite paring most losses while the US 10-year Treasury yields fell four basis points (bps) to 2.93%. It’s worth noting that the US 2-year Treasury yields rose 3.5% on a day to reach the 3.15% level and widened the inversion with the 10-year mark, which in turn hints at recession.

Moving on, NZD/USD traders should pay attention to the inflation and recession updates, as well as the second-tier US data for fresh impulse. Though, major attention will be given to the risk catalysts for clear directions.

Technical analysis

Any recovery remains elusive until NZD/USD trades successfully beyond the 0.6175 resistance confluence including the previous support line from early May and a monthly descending trend line.