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Kiwi struggles to find momentum ahead of key US CPI data release

NZD - New Zealand Dollar

The New Zealand dollar underperformed Wednesday, unable to hold onto rallies above 0.72 US cents despite little movement across major currencies. The NZD again moved in an inverse direction to commodity prices and equity markets, both of which edged higher overnight. With the USD flat and struggling to move off multi-year lows, investors seemingly appear reluctant in extending any NZD rally beyond near term resistance at 0.7230/0.7250 and back toward technical stops at 0.7315 ahead of tonight’s all-important US CPI print. With inflation fears still front and centre there is perhaps some nervousness that domestic indicators suggest the NZ economy is at risk of overheating perhaps bringing forward changes in monetary policy and possibly derailing the recovery.

Our attentions turn now to US CPI released and the ECB policy meeting for direction.

Key Movers

Price action across major currencies offered little to excite investors through trade on Wednesday as the USD struggled to move off multi-year lows and investors appeared reluctant to extend positions ahead of tonight’s all-important inflation print. While movement among G10 currencies was confined to +/- of 0.3% there were still standout underperformers on the day. The CAD retreated in the wake of the Bank of Canada monetary policy statement. The BoC left all policy settings unchanged and reiterated the same forward guidance on rates, failing to build on last month's hawkish shift.

The GBP was the other underperformer, slipping toward the bottom of recent ranges and touching lows at 1.4110. Sentiment for sterling shifted as the EU looks set to introduce sanctions if the dispute over Northern Ireland cannot be resolved.

Our attentions turn now to US CPI print and the ECB policy meeting. We are keenly attuned to any print above 5% year-on-year and commentary from ECB president Lagarde that suggests the ECB may taper its bond purchases in Q3 having frontloaded purchases through Q2.

Expected Ranges

NZD/USD: 0.7080 - 0.7315 ▼

NZD/EUR: 0.5850 - 0.5950 ▼

GBP/NZD: 1.9480 - 1.9770 ▲

NZD/AUD: 0.9250 - 0.9350 ▼

NZD/CAD: 0.8630 - 0.8750 ▼