NZD/USD remains sideways above 0.5600 as volatility squeezes ahead of US Inflation

• NZD/USD is juggling above 0.5600 as the focus has shifted to the US inflation data.
• Investors are going light towards the US inflation event.
• Business NZ PMI is seen lower due to the extremely tight RBNZ policy.

The NZD/USD pair is displaying topsy-turvy moves in the early European session as investors have shifted sideways ahead of the US inflation. Considering the worth of September’s inflation report, investors are going light and will prefer to make an informed decision post-release. The risk profile has been muted as volatility has contracted dramatically.

Meanwhile, the 10-year US Treasury yields have blocked around 3.92% and the US dollar index (DXY) is barricaded into the chartered territory. The mighty DXY is hovering around the immediate hurdle of 113.30. Wednesday’s hawkish Federal Reserve (Fed) minutes and mixed Producer Price Index (PPI) data failed to fetch a power-pack action in the DXY.

The Fed minutes dictated that Fed policymakers are in favor of keeping the policy extremely tight as the achievement of price stability is the foremost priority. Also, the sustainability of the tight policy for a period is highly crucial until the price pressures decline for several months.

The consideration of US inflation projections indicates that the headline Consumer Price Index (CPI) will decline to 8.1% while the core CPI will land higher at 6.5%. Uncertainty over the US CPI data has reached the rooftop as it will provide lucidity over the likely monetary policy action by the Fed, scheduled for the first week of November.

On the kiwi front, investors are focusing on the Business NZ PMI data, which is due on Friday. The economic data is seen lower at 52.5 vs. the prior release of 54.9. It seems that the consequences of restrictive policy by the Reserve Bank of New Zealand (RBA) are playing out now as firms have postponed their expansion plans due to higher interest obligations. Apart from that, China’s CPI data will be keenly watched. As per the consensus, the annual CPI data will accelerate to 2.8%.