New Zealand Dollar declines as risk-off mood supports US Dollar

NZD/USD weakens as broad caution and a steady US Dollar kept investors defensive ahead of updates on Iran’s nuclear program.
Fed is widely expected to keep interest rates unchanged at 3.50% to 3.75% in June.
China’s Retail Sales fell 0.6% year-on-year in May, missing expectations of a flat reading.

Akhtar Faruqui FXStreet

NZD/USD extends its losses for the third consecutive day, trading around 0.5810 during the Asian hours on Tuesday. The pair depreciates as the US Dollar (USD) holds steady amid broad market caution. Investors remain on the defensive as they await further updates regarding Iran’s unresolved nuclear program.

Both Washington and Tehran have not released the official text of the agreement; major shipping lines are delaying vessel rerouting through the strategic waterway until full transparency is established.

Even though US President Donald Trump announced that a memorandum of understanding (MoU) has been signed to end the conflict and reopen the blockaded Strait of Hormuz, market participants remain deeply cautious. According to Iran's semi-official Mehr news agency, the current draft calls for the strait to reopen within 30 days under Iranian arrangements.

The Federal Reserve (Fed) is widely expected to keep its benchmark interest rate unchanged at a target range of 3.50% to 3.75% on Wednesday, which could be attributed to the higher US inflation due to elevated energy prices linked to Middle East tensions. Traders will be closely monitoring the press conference for cues on how new Fed Chair Kevin Warsh intends to lead the central bank into its next era.

The New Zealand Dollar (NZD) struggles following a wave of weak economic data out of China. Because China is New Zealand's largest trading partner, buying roughly one-third of all Kiwi goods exports, the New Zealand Dollar acts as a primary liquid proxy for the Chinese economy.

China's domestic demand slumped sharply in May, with Retail Sales contracting by 0.6% year-on-year against expectations of a flat reading. Additionally, Fixed Asset Investment dropped at a faster pace of -4.1%, failing to meet the projected -2%. While Industrial Production offered a minor bright spot by coming in stronger-than-expected at 4.5%.

Economic Indicator

Industrial Production (YoY)

Industrial output is released by the National Bureau of Statistics of China. It shows the volume of production of Chinese Industries such as factories and manufacturing facilities. A surge in output is regarded as inflationary which would prompt the People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, if high industrial production growth comes out, this may generate a positive sentiment (or bullish) for the CNY, whereas a low reading is seen as negative (or Bearish) for the CNY.

GBP/USD recedes from tops, back to 1.3420

GBP/USD reverses course on Friday and falls toward the low 1.3400s. Swelling tensions in the Middle East and rising global oil prices are lending support to the Greenback, which in turn keeps the risk complex and Cable under marked downward pressure.

EUR/USD comes under pressure, drops below 1.1500

EUR/USD retreats to the sub-1.1500 region on Friday, giving back some ground after a three-day rally. The pair’s decline comes amid a risk-averse market mood and renewed demand for the US Dollar ahead of the weekend.

Gold meets support just above $4,000

Gold faces renewed selling pressure, falling sharply toweard the $4,000 mark per troy ounce as the US Dollar regains momentum. Escalating US-Iran tensions are keeping inflation concerns and expectations of further Fed rate hikes alive, weighing further on the yellow metal.

Bitcoin eyes 50-day EMA breakout, Ethereum consolidates, XRP steadies

Bitcoin, Ethereum, and Ripple trade near key technical levels on Friday as the broader cryptocurrency market pauses following last week's recovery. BTC is approaching the 50-day Exponential Moving Average while ETH continues to consolidate between two major EMAs.

Warsh needs to restore his reputation

We were glad to see our deeply negative reaction to the Warsh press conference was not some personal peculiarity. Just about everybody in the financial press felt the same way. The consensus is building it’s not the Fed in the dog-house but only Warsh. Today the WSJ changed it tune and blasted Warsh—"the honeymoon is already over..”

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.