NZD/USD bulls approach 0.6200 on upbeat New Zealand Q2 inflation data, RBNZ move

• NZD/USD holds onto Friday’s recovery moves on firmer NZ Q2 CPI.
• New Zealand CPI rose past market expectations and prior releases in Q2 2022, RBNZ announced new standing repurchase facility.
• Market’s cautious optimism, absence of Fed speakers can help Kiwi pair to extend recent rebound.
• Qualitative catalysts are the key as inflation, recession fears are of paramount importance.

NZD/USD justifies firmer New Zealand inflation data while keeping the corrective pullback from the two-year low, marked on Friday, to refresh the intraday high near 0.6165-70 during Monday’s initial Asian session. Also favoring the Kiwi pair could be the latest move by the Reserve Bank of New Zealand (RBNZ), as well as the US dollar’s pullback amid cautious optimism in the markets.

New Zealand’s second quarter (Q2) headline inflation, as per Consumer Price Index (CPI), rose to 7.2% YoY versus compared to 7.1% market consensus and 6.9% prior. The details also mentioned that the quarterly readings also strengthened to 1.7% QoQ versus 1.5% expected and 1.8% prior, per the latest release from Statistics New Zealand.

Additionally, New Zealand’s Business NZ PSI for June also rose to 55.4 versus the upwardly revised 55.3 reading.

Earlier in the day, the RBNZ announced new standing repurchase facility rules while stating, per Reuters, “Financial institutions may deposit the local currency with it in exchange for nominal government bonds to keep short-term interest rates at par with the bank's official cash rate.”

Other than New Zealand CPI and RBNZ move, NZD/USD also cheers the US dollar’s weakness amid downbeat US data and mixed Fedspeak.

That said, US Retail Sales for June grew 1.0% MoM versus 0.8% expected and -0.1% prior (revised from -0.3%) whereas the University of Michigan's Consumer Confidence Index edged higher to 51.5 in July's flash estimate, versus 49.9 expected and 50.0 prior.

However, the Index of Consumer Expectations declined to its lowest level since May 1980 at 47.3. Further, the US Industrial Production also contracted by 0.2% MoM in June while the New York Empire State Manufacturing Index rose to 11.1 versus -2.0 expected and -1.2 prior.

Among the key Federal Reserve (Fed) policymakers, Atlanta Fed President Raphael Bostic said on Friday that June's 75 basis points rate hike was a "big move" and added that the Fed wants policy transition to be orderly, as reported by Reuters. On the other hand, San Francisco Fed President Mary Daly said on Friday that the "Fed is working on getting down inflation without stalling economy." Further, St. Louis Federal Reserve Bank President James Bullard sounded neutral as he said, per Reuters, on Friday that it wouldn't make too much of a difference to do a 100 basis points (bps) or a 75 bps rate hike at the next meeting.

It’s worth that US Treasury Secretary Janet Yellen mentioned during the weekend that a strong dollar reduces US competitiveness to some extent. It is part of the monetary policy mechanism.

Amid these plays, Wall Street portrayed notable gains but the US Treasury yields eased on Friday.

Looking forward, a light calendar on Monday joins Fed policymakers’ blackout period to highlight the chatters surrounding inflation and recession as the key factors to determine immediate NZD/USD moves.

Technical analysis

A clear upside break of the monthly resistance line, around 0.6160 by the press time, appears necessary for the NZD/USD bulls to keep reins. Even so, May’s low around 0.6220 will be a crucial hurdle to watch. Meanwhile, pullback remains elusive until the quote drops back below 0.6100.