NZD/USD declines towards 0.6100 as US Biden sets to tax riches more, China CPI in focus

• NZD/USD is declining towards 0.6100 as US Biden has proposed more taxes for riches.
• Contracting Fiscal policy along with rising interest rates by the Fed might show a synergic impact on US Inflation.
• Higher liquidity infusion in the Chinese economy will bring more business for the New Zealand Dollar.

The NZD/USD pair has failed to recapture the critical resistance of 0.6120 in the Asian session. The Kiwi asset is declining towards the round-level support of 0.6100 as the headlines that US President Joe Biden has proposed raising corporation tax from 21% to 28% has strengthened negative market sentiment further.

US Biden wants a 25% billionaire tax and large levies on rich investors. He has also proposed a tax on income over $400,000 at 39.6% in the budget. It looks like the United States fiscal policy is coming into play to restrict Consumer Price Index (CPI) from flexing its muscles further. Liquidity squeezing from the market in the form of higher taxes might have a decent impact on consumer spending.

The headline of taxing US riches more is also putting pressure on the S&P500 futures. The 500-US stocks basket futures are showing losses in the Asian session. It seems that insignificant Wednesday’s recovery move will be capitalized as a selling opportunity by the market participants.

The US Dollar Index (DXY) might show some upside moves on the proposal of higher taxes from US Biden. At the time of writing, the USD Index is hovering above 105.20 and is expected to resume its upside journey.

This week, the US Nonfarm Payrolls (NFP) data will remain in the spotlight. As per the consensus, the US economy has added fresh 203K payrolls in February, lower than the former bumper release of 517K. The Unemployment Rate is seen steady at 3.4%. Investors would be worried about Average Hourly Earnings data, which is expected to increase to 4.8% vs. the prior release of 4.4% on an annual basis. An increase in the labor cost index will bolster the chances of bigger rate hikes from the Federal Reserve (Fed).

Meanwhile, China’s Consumer Price Index (CPI) data is on investors’ radar. China’s CPI is expected to decline to 1.9% from the prior release of 2.1% on an annual basis. Monthly CPI is likely to trim to 0.2% from the former release of 0.8%. Lower inflation might force China’s administration and the people’s Bank of China (PBoC) to infuse more liquidity into the economy.

It is worth noting that New Zealand is one of the leading trading partners of China and higher liquidity infusion in the Chinese economy will bring more business for the New Zealand Dollar.