NZD/USD corrects to near 0.6350 despite subdued USD Index, US Retail Sales eyed

• NZD/USD has dropped to near 0.6350 despite USD Index remaining choppy.
• NZ inflation is expected to soften significantly amid aggressive interest rate policy by the RBNZ.
• The USD Index is making efforts to deliver a solid recovery after a significant sell-off.

The NZD/USD pair has extended its correction to near 0.6350 in the early European session. The Kiwi asset has faced pressure after mixing China’s Gross Domestic Product (GDP) data. China’s quarterly GDP has expanded at a 0.8% pace higher than the estimates of 0.5% but extremely lower than the prior pace of 2.2%. While annualized GDP landed at 6.3%, lower than the consensus of 7.3% but higher than the former release of 4.5%.

Mixed GDP numbers have prompted the need for more loose policy from the People’s Bank of China (PBoC) as the economic recovery is not on track due to lower consumer spending and rising pain in real estate.

Apart from the GDP figures, annual Retail Sales have decelerated to 3.1% vs. the estimates of 3.2% and the former release of 12.7%. Contrary, annualized Industrial Production jumped to 4.4$ vs. the consensus of 2.7% and the prior figure of 3.5%. It is worth noting that New Zealand is one of the leading trading partners of China and bleak economic recovery in China impacts the New Zealand Dollar.

Going forward, the New Zealand Dollar would react to the second-quarter inflation data, which will release on Tuesday at 22:45 GMT. The quarterly Consumer Price Index (CPI) is seen softening to 0.9% vs. the former pace of 1.2%. Annualized CPI is expected to decelerate to 5.9% against the prior release of 6.7%.

Meanwhile, S&P500 futures have posted nominal losses in Asia, portraying a cautious market mood. The US Dollar Index (DXY) is demonstrating a non-directional performance below the psychological resistance of 100.00. The USD Index is making efforts to deliver a solid recovery after a significant sell-off. Consistently softening United States inflation and easing labor market conditions are the real triggers behind doomsday for the USD Index. The next trigger for the USD Index will be the monthly Retail Sales data for June, which will release on Tuesday.