NZD/USD pulls away from weekly highs, continues to trade above 0.6600
|- Annual CPI in New Zealand rose to 1.9% in Q4.
- US Dollar Index climbs to multi-week highs above 97.80.
- Coming up: IHS Markit's Manufacturing and Services PMI data for US.
The NZD/USD pair closed the day on a strong footing on Thursday with the NZD gathering strength on the back of the inflation data. After touching its highest level in a week at 0.6630, however, the broad-based USD strength made it difficult for the pair to continue to push higher. As of writing, the pair was virtually unchanged on a daily basis at 0.6615.
Inflation to allow RBNZ to stay on hold
The data published by Statistics New Zealand revealed that inflation, as measured by the Consumer Price Index (CPI), rose to 1.9% in the fourth quarter from 1.5% in the third quarter and came in higher than the market expectation of 1.8%.
Assessing the potential impact of the data on the Reserve Bank of New Zealand's policy outlook, "today’s result will be a modest positive surprise for the RBNZ and reinforces our expectation for no-OCR cut over the first half of 2020," said Westpac analysts. "With inflation on track to be comfortably within the target range over the next year, the RBNZ’s other mandate – supporting maximum sustainable employment – is likely to be key to any future monetary policy moves."
On the other hand, the broad-based USD strength keeps the pair's upside capped on Friday. The US Dollar Index, which snapped a three-day losing streak on Thursday, stretched higher and touched its best level since early December at 97.86. The selling pressure surrounding the major European currencies help the USD preserve its strength.
In the second half of the day, the IHS Markit will release the preliminary Manufacturing and Services PMI data for the US.
Technical levels to watch for
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