NZD/USD marches towards 0.6300 as China's Inflation escalates to 2.7%

• NZD/USD is scaling towards 0.6300 as the DXY has declined ahead of US CPI.
• A lower consensus for the US CPI has forced investors to dump the DXY.
• China's inflation has increased to 2.7% but remained lower than expectations.

The NZD/USD pair is advancing sharply towards the round-level resistance of 0.6300 after the National Bureau of Statistics of China reported a higher Consumer Price Index (CPI) at 2.7% than the prior release of 2.5%. However, the annual cost pressures remained lower than the expectation of 2.7%. The monthly data remains in line with the estimates of 0.5%.

The inflation universe constituent, which measures the average price change received by the Chinese producers, the Producer Price Index (PPI), remained extremely lower at 4.2% than the forecasts of 8% and the prior release of 6.1%. Well, the initiations of bids for the antipodean seem backed by a drop in the US dollar index (DXY).

The mighty US dollar index (DXY) has delivered a downside break of the consolidation formed in a 106.30-106.40 range.  A bearish open rejection-reverse formation in the DXY has underpinned a risk-on market mood. The market participants are expected to dump the DXY ahead of the US CPI data release. The consensus for the plain-vanilla US CPI is lower at 8.7% than the former figure of 9.1% as oil prices have remained vulnerable in July.

O the kiwi front, inflation expectations released at 3.07% on Monday, lower than the prior release of 3.29% is considered a sign of exhaustion in the price pressures but more warrants for the claim are still desired.

For now, price pressures are already soaring in the NZ economy and have not displayed a meaningful exhaustion sign yet. As per the June print, an inflation rate of 7.3% is sufficient to create headwinds for the households.