NZD/USD perched mid-range awaiting fresh cues

• NZD/USD is flat in the Tokyuo open as the dust settles over US CPI.
• Eyes now turn to the RBNZ for direction in the Kiwi.

NZD/USD is flat into the Tokyo open after an up-and-down day surrounding the US consumer Price index. The Kiwi is trading at 0.6330 and has stuck to a 10-pip range so far following Tuesday's 0.6389 and 0.6296. 

The annual inflation rate in the US, as measured by the Consumer Price Index,  cooled only a touch to 6.4% in January from 6.5% in December, less than market forecasts of 6.2%, suggesting that getting inflation under control will take more time than expected. The US Dollar index traded around 103.00 on Tuesday but posied higher due to the hotter-than-expected US inflation dashing hopes that the Federal Reserve will soon end its tightening campaign.

RBNZ outlook

''The lack of a NZD drift likely reflects the idea the factors holding up US inflation may also impact here, even if inflation expectations data yesterday “pleased” local bond market,'' analysts at ANZ Bank said.

''Now that local markets have swung back more towards expecting a 50bp hike next week, rather than 75bp, the focus turns wholeheartedly towards next week’s RBNZ MPS.''

''We expect the RBNZ will raise the Official Cash Rate (OCR) 50bp to 4.75% at its Monetary Policy Statement (MPS) next Wednesday. In terms of alternatives, a 75bp hike is more likely than +25bp, in our view,'' the analysts argued. 

''A hawkish tone is likely, along with only a marginally lower OCR track, if it’s lowered at all. And it’s no small beer for the RBNZ to deliver a double hike when they’ve already raised 400bp, house prices are down 15% and still falling, and business and consumer confidence are on the floor,'' the analysts added.