NZD range bound as attention turns to US CPI update

Key Movers

Price action across was largely muted through Monday as markets appeared content in squaring positions following last week's risk-off move and preparing for this week's all-important US CPI print. The USD was broadly flat, the yen the weakest of majors, while the euro held onto gains above 1.10 and Sterling pushed above 1.2750, outperforming major counterparts.

With little of note on today’s docket, our attentions turn to Thursday night's US CPI update, with markets likely to withhold major bets and track a narrow range in the lead-in.

Looking beyond this week, reports have emerged the US government will shut down when Federal funding runs out on September 30. While there is no risk of debt default similar to that, that plagued markets earlier this year, the end of the current Federal funding arrangement will see key government agencies shut down, resulting in delayed reporting and a lack of key services.

Republicans are reportedly emboldened by Fitch’s decision to downgrade the US sovereign risk rating, jumping on the opportunity to push for spending cuts and budget controls. If a deal cannot be reached and the narrative gathers steam, the Fed may be forced to delay a September rate hike, while pressure on US treasury yields will grow and could spill over and weaken the USD.

Our attentions are now attuned to developments in this narrative.