AUD/NZD eyes a break above 1.1700 on the downbeat NZ Retail Sales

• AUD/NZD has sensed buying interest after the release of the vulnerable NZ Retail Sales data.
• The NZ Retail Sales have declined to -2.3% vs. the former release of -0.5%.
• Dismal improvement in the labor cost index is a major reason behind weaker Retail Sales.

The AUD/NZD pair has picked significant bids near 1.1160 as Statistics New Zealand has reported vulnerable Retail Sales figures. The economic data has landed at -2.3%, lower than the prior release of -0.5%. This indicates that the overall demand in the kiwi zone is declining sharply led by soaring price pressures.

It is worth noting that higher price pressures should result in higher Retail Sales as households are needed to make more payouts to offset the increment in prices. However, the overall Retail Sales have declined, which indicates a serious slowdown in retail demand. Investors should be aware of the fact that the labor cost index is not rising as per the responsiveness in the price rise index. Therefore, households are buying the necessity goods as their demand cannot be postponed but are ditching the purchase of durable goods.

No doubt, to tame high price pressures, the Reserve Bank of New Zealand (RBNZ) is continuously hiking its Official Cash Rate (OCR). The OCR has stepped up to 3% after four consecutive 50 basis points (bps) rate hikes announcement by RBNZ Governor Adrian Orr. More rate hike announcements are on cards as the inflation rate is still far from the desired rate.

On the aussie front, investors have ignored the downbeat Australian PMI numbers. The S&P Global Manufacturing PMI slipped sharply to 54.5 vs. expectations of 57.3 and the prior release of 55.7. While the Services PMI data landed lower to 49.6 against the forecasts of 54 and the former figure of 50.9.