NZD/USD bears have taken out 0.6000 on strong US dollar, US CPI beat

• NZD/USD bears take the bird down into a hard landing on the 0.60 level. 
• The bird is testing below the level with a low of 0.5986 so far, the lowest since 2020. 

NZD/USD has been sold off heavily on Tuesday to the lowest levels since 2020, down some 2.4% at the time of writing and falling from a high of 0.6161 to a low of 0.5986 as we head towards the early Asian open on Wednesday. The data from the US has been the culprit, sending the US dollar surging higher along with US yields.  The Federal Reserve will release its policy decision at the close of its two-day meeting next week, on Sept. 20-21.

''The shock rebound in US Consumer Price Index (which the consensus assumed had peaked) reverberated violently through financial markets overnight, and has put NZD/USD back below the key 0.60 level this morning,'' analysts at ANZ Bank said. 

The data sent both the US dollar and bond yields sharply higher as the expectations for an oversized rate hike from the Federal Reserve. Inflation in the United States ran at an 8.3% annualized pace in August, ahead of expectations for an 8.0% rise. The markets generally expect 75 basis points when its policy committee meets next week and lower market hopes for a smaller increase.

However, there is a one-in-five chance that the Fed will raise rates by a full percentage point, up from zero a day before the CPI report according to FEDWATCH. Nomura analysts said on Tuesday that the Fed is likely to raise its short-term interest rate target by a full percentage point at its policy meeting next week, because of the emergence of upside inflation risks.

''The data make next week’s Fed decision more uncertain (it was looking much more assured yesterday,'' the analysts at ANZ bank said. They look to today's key event in the New Zealand current account data. ''We expect a deficit of 7.5% of Gross Domestic Product, and that’s big!''