NZD/USD was pressured at the end of last week due to a late surge in the USD as demand for the currency took off, sending the DXY index through 105 in the wake of a stronger-than-expected US core PCE deflator.
This was the Fed’s preferred measure of inflation, and the data companies a slew of prior inflationary data outcomes from the US calendar over the past few weeks.
The data's reacceleration has sent shockwaves through US markets, which analysts at ANZ Bank explained ''which are now pricing in a 5.4% peak in the fed funds rate and are in the process of pricing out cuts in H2 2023.''
The analysts said that they've discussed this potential for some time, and it is now materialising. ''But while it speaks to a stronger-than-otherwise USD, unlike in 2022, the Fed isn’t outpacing all other central banks, and locally, risks are now tilted towards the RBNZ also having more work to do,'' the analysts argued. ''That may in time make the NZD more resilient to USD strength than other currencies, but that wasn’t evident overnight.''
Meanwhile, New Zealand Retail Sales for the fourth quarter came in at -0.6% vs the prior 0.4%. For the year, it arrived at -4%.
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