NZD/USD attempts pick up from 0.5900 amid the brighter market mood

The New Zealand Dollar trims some losses as Thursday's sell-off found support right above 0.5900.
Strong US PPI data cooled hopes of Fed cuts and boosted the US Dollar on Thursday.
On Friday, downbeat China's Retail Sales and Industrial Production data increased pressure on the NZD.

Guillermo Alcala FXStreet

The New Zealand Dollar is showing a mild recovery on Friday, trimming losses after a nearly 1% sell-off on Thursday, hit by a stronger US Dollar after hot US PPI figures and downbeat industrial production and retail sales data from China.

The pair found support at 0.5900, on its reversal from two-week highs right below the 0.6000 psychological level, and is trading at 0.5925 at the time of writing, yet with technical indicators showing a lack of bullish momentum.

Weak data from China adds pressure on the NZD

Chinese figures released earlier on Thursday revealed that Retail Sales grew at a 3.7% yearly pace in July, missing expectations of a 4.6% reading, following June’s 4.8% increase. Beyond that, Industrial Production undershot, with a 5.7% advance in the previous 12 months, well below the 5.9% consensus and June’s 6.8% growth.

These figures have dampened hopes of a significant recovery of the world's second-largest economy and New Zealand’s largest trading partner, adding selling pressure on the NZD.

Kiwi was already on its back foot, as the sharp increase in US PPI cast a shadow on Fed easing hopes. U.S. producer prices accelerated at their fastest pace in the last three years in July, posing a headache for the Fed, which will have to deal with a context of increasing inflation and a deteriorating labour market. Investors’ risk-averse reaction to the data sent the US Dollar rallying.

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.

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