NZD/USD stays firmer around 0.6500 on better-than-forecast New Zealand Inflation

• NZD/USD pops 25 bps on upbeat New Zealand Q4 Consumer Price Index.
• NZ CPI came in 7.2% YoY, 1.2% QoQ versus 7.1% and 1.3% expected respectively.
• US PMIs failed to impress US Dollar for long as Composite PMI marked seven-month downtrend.

NZD/USD begins Wednesday’s trading on a firmer footing on upbeat New Zealand (NZ) inflation data, initially poping up to 0.6525 before retreating to 0.6500 by the press time. Adding strength to the Kiwi pair’s run-up could be the US Dollar’s failure to keep the late Tuesday’s gains amid dovish bias for the Federal Reserve’s next move.

NZ Consumer Price Index (CPI) for the fourth quarter (Q4) rose past 7.1% YoY market forecast to reprint the 7.2% figures while the QoQ data suggests a 1.4% number against 1.3% expected and 2.2% prior. It’s worth noting that the Reserve Bank of New Zealand (RBNZ) anticipated 7.5% yearly inflation in its November meeting.

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On the other hand, preliminary readings of the US S&P Global Manufacturing PMI for January rose past 46.2 market forecast and 46.1 market expectations with 46.8 figure while the Services PMI followed the suit with the 46.6 figure for the said month, versus 44.5 forecast and 44.7 prior. That said, the S&P Global Composite PMI for January increased to 46.6 from 45.0 prior and the 44.7 consensus, marking the seventh consecutive read below 50. 

Following the US data, the US Dollar Index (DXY) managed rise for a brief time before closing in the red. The reason could be linked to the comments from Chief Business Economist at S&P Global Chris Williamson who said, “The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January."

That said, receding odds of the Federal Reserve's (Fed) hawkish play in the next week’s monetary policy meeting, mainly due to the recently downbeat US data seemed to have weighed on the US Treasury bond yields, as well as the US Dollar. It should be noted that the mixed earnings report and sentiment portrayed Wall Street’s mixed close on Tuesday.

Having witnessed the initial reaction to New Zealand inflation data, which is not much alarming, the NZD/USD pair traders may wait for Australia’s CPI and NZ Credit Card Spending data for December for immediate directions.

Technical analysis

A six-week-old ascending resistance line near 0.6535 restricts immediate NZD/USD upside amid nearly overbought RSI conditions.