NZD/USD bears stay on top with target at 0.6980

NZD/USD ended the day down 0.55% at around 0.7020. The pair touched a low of 0.7012, falling from a high of 0.7071. The US dollar remained on top as markets continued to buy into the inflation theme following Wednesday's surprise inflation data.

The US dollar printed its highest level since July 2020 at 95.196. The DXY ended the session higher by some 0.32% following the strongest inflation reading in more than three decades. On Wednesday, the Consumer Price Index (CPI) posted its biggest monthly gain in four months. This took to lift the annual increase in inflation to 6.2%, the strongest year-on-year rise since November 1990.

CPI is now at new cycle highs and both the yearly and monthly prints show a second straight month of accelerating gains. Consequently, traders are anticipating US interest rate hikes next year which is underpinning the US dollar. 

All eyes turn to the RBNZ

The kiwi was dragged lower on the surprisingly soft Aussie jobs data from Thursday. However, analysts at ANZ bank said that there are good reasons to look through that data. Some observers will note that the data did not catch the opening up of lockdowns, so this may not reflect the true picture of the health of the jobs market,

Meanwhile, looking ahead, the domestic data calendar is pretty light ahead of the RBNZ MPS. ''Yesterday we noted that the NZD had potential to benefit from the actual delivery of hikes, but as we near the decision, markets don’t seem to be shy of fading NZD strength even knowing that hikes (and thus carry) are coming.,'' the analysts at ANZ Bank said,

''The Kiwi did well after the 2020 lockdown, and has been mixed through 2021 (and has struggled >0.72 of late), but headwinds could be coming in 2022 as the rest of the world normalises policy. Let’s see.''