NZD/USD stays pressured at two-year low near 0.6000 on downbeat NZ Current Account

• NZD/USD remains depressed at the 29-month low after New Zealand data.
• New Zealand Current Account deficit increased more than expected in Q2.
• Bears printed the biggest daily slump since March 2020 after US inflation data renewed recession woes.
• Thursday’s New Zealand GDP, US Retail Sales will be important for fresh impulse.

NZD/USD holds lower ground at the recently flashed two-year bottom of 0.5987 after New Zealand’s (NZ) second quarter (Q2) Current Account data was published during Wednesday’s initial Asian session. The Kiwi pair slumped the most in 30 months the previous day after the US Inflation data renewed recession fears.

New Zealand’s Q2 Current Account dropped to $-5.224B versus $-4.7B expected and $-6.143B prior. However, the Current Account – GDP Ratio improved to -5.224% from -7.4% market forecasts and -6.5% in previous readings.

On the other hand, US Consumer Price Index (CPI) for August rose past 8.1% market forecasts to 8.3% YoY, versus 8.8% prior regains. The monthly figures, however, increased to 0.1%, more than -0.1% expected and 0.0% previous readings. The core CPI, means CPI ex Food & Energy, also crossed 6.1% consensus and 5.9% prior to print 6.3% for the said month.

The US inflation data renewed fears of the Federal Reserve’s aggressive rate hike as the bets on the Fed’s next move turned increasingly hawkish, with the 75 basis points (bps) of a hike appearing almost certainly next week. It’s worth noting that there is around 25% chance that the US Federal Reserve (Fed) will announce a full 1.0% increase in the benchmark Fed rate on September 21 meeting.

Further, the yield inversion also widened after US inflation data and propelled the recession woes, which in turn drowned the NZD/USD prices due to the pair’s risk-barometer status. That said, the US 10-year Treasury yields rallied to 3.412% and those for 2-year bonds increased to 3.76% following the data, around 3.41% and 3.745% respectively at the latest. Furthermore, the US stocks had their biggest daily slump in almost two years after the US CPI release, which in turn weighed on the NZD/USD.

Elsewhere, US President Joe Biden’s chip plans to increase hardships for China join the rush toward stronger ties with China to fuel the Sino-American woes. Further, expectations that Russia will hit hard after retreating from some parts of Ukraine also weighed on the market sentiment and the NZD/USD price.

Having witnessed a show of bears, the NZD/USD may experience a sidelined move amid a light calendar ahead of the US session that offers Producer Price Index (PPI) data for August. However, major attention will be given to Thursday’s NZ Q2 Gross Domestic Product (GDP) and August month US Retail Sales for fresh impulse.

Technical analysis

Unless bouncing back beyond July’s low of 0.6060, NZD/USD is on the way to visiting a four-month-old descending support line, close to 0.5920 by the press time.