NZD/USD drops back under 0.7150, despite recovering NZ consumer spending

• NZD/USD is ebbing lower and is now under 0.7150.
• The pair failed to derive support from evidence that NZ consumer spending is rebounding in Q4.

NZD/USD continues to trade with a negative bias and is currently down about 0.3% on the day and trading to the south of the 0.7150 level, having briefly challenged Monday’s highs in the 0.7170s during Tuesday Asia Pacific trade. Kiwi weakness comes despite data showing a solid rebound in consumer spending in New Zealand in October.

Whether the modest pullback from weekly highs seen on Tuesday will translate into a more meaningful turnaround following the recent recovery from the 200-day moving average at 0.7100 remains to be seen. FX markets are for now mostly happy to trade within recent ranges and in subdued fashion as market participants await fresh macro catalysts, of which Wednesday’s US Consumer Price Inflation (CPI) report of October could be one.

Ahead of Wednesday’s US CPI report, the October Producer Price Inflation (PPI) report was recently released. The headline and core YoY and MoM metrics were broadly in line with expectations thus there hasn’t been any notable market reaction, but all remained at historically elevated levels, which suggests that Wednesday's CPI report will show the same. US markets seem more focused on who US President Joe Biden will choose as next Fed Chair right now, however. US real and nominal yields have tumbled on Tuesday with some attributing the drop to reports that Fed Governor Lael Brainard (seen as more dovish than current Chair Jerome Powell) was interviewed for the position and is seen as a contender. Her nomination would weigh on the US dollar.

NZ consumer spending recovers as lockdowns eased

Economic data released overnight showed the impact of the Q3 New Zealand lockdowns waning at the start of Q4; October Electronic Card Retail Sales were up 10.1% MoM. That means retail sales have now recovered about half of the near 20% MoM drop seen in August when lockdowns first came into force across the country. With Auckland set to exit lockdown at the end of the month as vaccination rates hit key thresholds, retail sales are expected to continue to rebound for the remainder of Q4.