NZD/USD remains depressed below 0.6400 after downbeat NZ data ahead of US/China inflation

• NZD/USD holds lower ground near a three-week low after falling the most since late May.
• New Zealand’s Manufacturing Sales slumped in Q1, Electronic Card Retail Sales also fell in May.
• Growth, inflation fears underpin US dollar’s safe-haven demand, China’s fresh covid woes exert additional downside pressure.
• China CPI/PPI and risk catalysts may offer intermediate moves but US CPI is the key.

NZD/USD bears keep reins, despite recent inaction, around a multi-day low of 0.6380 amid downbeat New Zealand and the US dollar’s upbeat performance ahead of the key catalysts. That said, the Kiwi dropped the most in nearly three weeks the previous day as risk-aversion drowned the Antipodeans.

New Zealand Q1 Manufacturing Sales turned negative to -3.5% versus the previous growth of 8.2%. Further, Electronic Card Retail Sales for May also disappointed the NZD/USD trades with 0.7% YoY growth compared to 2.1% prior. It’s worth noting, however, that the Kiwi pair failed to register any quick reaction to the downbeat data even if the prices remain pressured.

That said, the risk-off mood weighed on the Antipodeans the previous day as fears of inflation and growth accelerated after the European Central Bank (ECB) conveyed fears of inflation weighing on growth, via their forecasts. The bloc’s central bank also matched market consensus while announcing an end of Quantitative Easing from July 1 and 25 basis points (bps) of a rate hike on July 25, versus expectations of a 50 bps move.

Elsewhere, the White House has already conveyed the risk of higher inflation ahead of today’s US Consumer Price Index (CPI) data while the World Bank (WB) and the Organisation for Economic Co-operation and Development (OECD) have raised concerns over economic growth.

Furthermore, the resurgence of covid-led activity restrictions in Shanghai and Beijing joined no solution to the Russia-Ukraine crisis to exert additional downside pressure on the market’s sentiment.

The sour sentiment could be witnessed via the biggest daily slump in the Wall Street benchmarks for the week whereas the US 10-year Treasury yields also refreshed their monthly high before retreating to 3.04%. The US Dollar Index (DXY) also rallied the most in a week while cheering the greenback’s safe-haven status.

Looking forward, China’s CPI and Producer Price Index (PPI) data for May, expected 2.2% and 6.4% versus 2.1% and 8.0% in that order, will offer immediate directions to the NZD/USD traders ahead of the US CPI.

Also read: US CPI Preview: Soft core set to drive dollar down, and two other scenarios

Technical analysis

Not only a clear U-turn from the 0.6560 horizontal hurdle but a successful downside break of the 21-DMA, around 0.6440, also direct NZD/USD prices towards further south. That said, 0.6290 may attack short-term sellers before directing them to the yearly low marked in May at around 0.6215.