NZD/USD slides towards 0.6300 on downbeat RBNZ inflation expectations, US CPI eyed

• NZD/USD pares the biggest daily gains in three weeks after downbeat NZ data.
• RBNZ inflation expectations dropped to 3.3% versus 3.62% prior.
• Sluggish sentiment ahead of key data/events joins hopes of firmer US inflation to weigh on Kiwi price.

NZD/USD takes offers to refresh intraday low near 0.6330 as New Zealand data disappoints Kiwi buyers during early Tuesday. In doing so, the quote also justifies the mildly offbeat mood, as well as hawkish hopes from the US Federal Reserve (Fed) ahead of the US Consumer Price Index (CPI) for January.

Reserve Bank of New Zealand’s (RBNZ) Inflation Expectations for the first quarter (Q1) of 2023 pushed back the policy hawks by showing 3.3% figures versus 3.62% prior. It’s worth noting that the lesser-than-expected New Zealand (NZ) Food Price Index for January, 1.7% MoM versus 2.2% market consensus and 1.1% prior, also weigh on the NZD/USD prices.

Above all, the market’s anxiety before the key data/events and the fresh fears surrounding China seem to exert downside pressure on the Kiwi pair.

Downbeat prints of the US inflation expectations contrast with the hawkish Fed speak to challenge the market moves. On the same line, hopes of positive surprise from the US inflation and fresh US-China jitters add strength to the mild pessimism.

That said, the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) eased from monthly highs to 2.31% and 2.44% at the latest. Even so, Fed Governor Michelle Bowman said on Monday that the Federal Reserve will need to continue to raise interest rates in order to get them to a level high enough to bring inflation back down to the central bank's target rate, per Reuters. Before him, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”

On a different page, “US Congress will take a bipartisan look at unidentified aerial objects that have made their way into U.S. and Canadian airspace, and why they were not found sooner,” said US Senate Majority Leader Chuck Schumer. It’s worth noting that a US Military General previously ruled out odds favoring the likely hand of China in the “unidentified objects” which were shot down during the weekend.

Amid these plays, the S&P 500 Futures print mild losses around 4,140, following the biggest daily jump of the month. That said, the US 10-year Treasury bond yields drop nearly two basis points to 3.69% at the latest, after reversing from a one-month high the previous day. It should be noted that the US Dollar Index (DXY) remains pressured while equities in the Asia-Pacific region trade mixed at the latest.

Looking forward, NZD/USD traders should pay attention to the US CPI for January, expected 6.2% YoY versus 6.5% prior, as markets do expect upside surprise amid year-start moves but the early signals haven’t been so impressive.

Also read: US Consumer Price Index Preview: US Dollar vulnerable to violent crash, every 0.1% in Core CPI matters

Technical analysis

Multiple failures to cross the 50-DMA, around 0.6375 by the press time, directs NZD/USD towards the monthly low surrounding 0.6270.