NZD surges as USD breaks key supports

Key Movers

The US dollar remained on the back foot through trade on Thursday, unable to backtrack and retrace losses suffered in the wake of Wednesday’s softer than anticipated CPI report. The US Producer Price Index printed below expectations, adding more fuel to the cooling economic narrative. Final demand rose at is slowest pace since 2020 and points to a broader slowdown in GDP and key inflation markers. US treasury yields fell and the yield curve steepened as markets elevated bets the Fed will be done hiking rates after a final 25 basis point increase at the end of the month. With an increasing expectation the peak in Fed Fund Rates has been reached and for cuts over 2024, the USD and the DXY index broke key supports with the DXY trading below 100. Having broken critical technical resistance levels there is scope to suggest the USD could be preparing for a deeper downward correction. With the USD retreating, major counterparts are finding real momentum, with the JPY forcing the dollar under 138, while the GBP has cruised through 1.30 and 1.31, and the euro now comfortable trading above 1.12.

With little of note on the day's macroeconomic docket, attentions are attuned to broader market direction. With key technical levels broken and others at risk, sentiment will play a huge role in shaping direction into the weekly close. Is the market emboldened by the prospect of a peak US interest rate or will something spook investors and force an 11^th hour retracement?