NZD falters amid higher US rates and mixed data

Daily Currency Update

The New Zealand dollar retreated through trade on Thursday sliding back below US$0.6150 amid hotter-than-expected US inflation indicators and robust labour data. US data was mixed with US PPI demand for February printing well above median estimates as higher food and energy prices continue to drive elevated input costs, lifting expectations for another hot PCE deflator print. Inflation pressures continue to linger yet consumer sentiment and spending is beginning to falter. Retail sales rose just 0.6% in February while January data was revised down as consumers began to feel the pinch of a higher cost of living. While signs the US is headed for a period of stagflation intensify market focus continues to be drawn to inflation metrics and the timing and trajectory of US rate cuts. This latest print all but extinguishes any hope of a May rate adjustments and lowers the expectations for rate cuts into year need. Markets are now pricing just 76 basis points of cuts into year-end, down from 95 basis points at the end of last week. With US yields edging upward and the USD pushing higher the AUD marked intraday lows at US$0.6122.
Our attention now turns to local manufacturing PMIs and another run of US data with manufacturing surveys, industrial production, consumer sentiment and inflation expectations all helping shape a clearer picture of US economic performance.