New Zealand Dollar hits fresh two-month highs past 0.5900 despite weak data from China

NZD/USD holds gains at two-month highs around 0.5820, favoured by generalised US Dollar weakness.
China's Industrial Production and Retail Sales data for July hint at weak economic growth in Q3.
A dovish repricing of the Fed's monetary policy keeps the Greenback sold across the board on Monday.

Guillermo Alcala FXStreet

The New Zealand Dollar (NZD) keeps crawling higher against a weaker US Dollar (USD) with price action reaching the 0.5920 area for the first time since early June. Kiwi Dollar bulls did not flinch after a set of downbeat data from China on Monday and kept buying the pair, with the US Dollar depreciating amid shrinking bets of a Federal Reserve (Fed) rate hike in September.

Data released by the Chinese Bureau of Statistics revealed that Industrial Production growth slowed down to 4.5% in the year to July, below market expectations of a 5% growth, following a 5.3% year-on-year rise in June. Beyond that, Retail Sales slowed down to a 0.6% yearly growth in July, less than half the 1.5% growth expected, and following a 1% increase in the previous month.

These figures add to evidence that growth in the world’s second-largest economy is likely to remain sluggish in the third quarter of the year, as domestic demand fails to improve. Chinese authorities acknowledged that the extreme weather conditions have had some impact on growth, but that they have not changed the general development trend.

Fed repricing is hammering the USD

The New Zealand Dollar is drawing support from a soft USD, which has opened the week on the same weak tone that closed the previous one, weighed by a dovish repricing of the Fed monetary policy.

Analysts at ING highlight that Friday’s “softer set of US retail sales data for July has added to the case against the Federal Reserve hiking rates in September (...) and expectations for a 50bp tightening cycle into next year have been scaled back to 35bp.”

Looking ahead, Analysts at ING argue that “looking at the US data calendar this week, it is hard to see much changing.” The experts highlight the minutes from the 29 July FOMC meeting as the key event, recalling that this was the gathering that “saw a 9-3 vote for unchanged rates and a confusing press conference, which saw longer-dated Treasuries sell off.”

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.

Economic Indicator

Retail Sales (YoY)

The Retail Sales data, released by the National Bureau of Statistics of China on a monthly basis, measures the value of goods sold by retailers in China. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the YoY reading comparing sales values in the reference month with the same month a year earlier. Generally, a high reading is seen as bullish for the Renminbi (CNY), while a low reading is seen as bearish.

GBP/USD hits fresh three-month highs above 1.3550

GBP/USD stretches north and refreshes three-month highs above 1.3500 in the European session on Monday. The prevalent US Dollar selling bias favors bullish traders and suggests that the path of least resistance for the pair remains to the upside.

EUR/USD extends gains above 1.1600 on USD weakness

EUR/USD extends its advance above 1.1600 in European trading hours on Monday. The US Dollar resumes its downside amid weaker-than-expected US economic data, shifting Fed expectations and fading geopolitical risk premium.

Gold looks to build strength above $4,400 amid fading Fed hike bets

Gold builds on Friday's bounce from the $4,300 neighborhood and attracts some follow-through buyers at the start of a new week. The commodity is now looking to extend momentum above the $4,400 mark, though it remains below the highest level since June 5, touched last Thursday, amid mixed fundamental cues.

Pepe defends a key support amid mixed retail demand

Pepe is up nearly 2% after a 10% decline last week, showing signs of a mild recovery, while broader crypto market risk appetite remains weak. PEPE derivatives data point to a mixed outlook, as Open Interest declines while funding rates turn positive. Technically, PEPE must hold above its $0.00000255 support floor to avoid a downside of over 10%.

Why the Fed replaced the Treasury buyers who left

When Japan moved to defend the Yen, the arrangement that drew the attention was the Federal Reserve's repo facility for foreign monetary authorities, which lets an approved foreign central bank raise dollars by temporarily handing Treasuries to the Fed rather than selling them into the market. The logic was elegant. Japan gets dollars, the Treasury market avoids a forced seller, and American long rates are spared. Coverage treated it as the mechanism that made the intervention work.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.