NZD/USD fails to break out of its daily range, remains below 0.66 after US CPI data
- Annual CPI falls to 1.8% in the U.S. in May.
- US Dollar Index ignores soft inflation data, posts small gains.
With the initial reaction to the inflation data from the United States, the NZD/USD pair rose modestly to a session high of 0.6590 but quickly erased its spike. As of writing, the pair was trading at 0.6575, losing 0.05% on a daily basis.
The lack of macroeconomic data releases from New Zealand on Wednesday allowed the pair to remain in a tight consolidation phase after closing the first two days of the week with small losses.
In the second half of the day, the U.S. Bureau of Labor Statistics reported that inflation in the U.S., as measured by the Consumer Price Index (CPI), edged down to 1.8% on a yearly basis in May from 2% in April and fell short of the market expectation of 1.9%. Furthermore, the core CPI, which strips volatile food and energy prices, ticked down to 2% annually while staying unchanged at 0.1% on a monthly basis.
Following the knee-jerk drop in response to the inflation figures, the US Dollar Index didn't have a difficult time recovering its losses as the Fed is likely to ignore the CPI readings and remain focused on the core PCE Price Index as its preferred gauge of inflation. At the moment, the DXY is up 0.07% on the day at 96.77.
In the early trading hours of the Asian session, a sharp market reaction to the labour market data from Australia could impact the AUD/USD pair as well as the positively-correlated NZD/USD pair on Thursday.
Technical levels to watch for
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
