Kiwi falters as China inflation data misses the mark

Daily Currency Update

The New Zealand dollar trended lower to start the week, scuppered by weaker-than-anticipated China inflation data. A consumer inflation report showed consumer prices remained flat when assessed on an annualised basis, missing market estimates for a 0.2% increase and when coupled with a 5.4% contraction in producer prices, fueled fears the economic recovery has stalled.

Amid a backdrop of weaker risk appetite, the NZD tracked toward intraday below as it hit US$0.6169, before finding support in a weaker US dollar. The dollar was unable to maintain the risk-off momentum enjoyed following the China data as treasury yields moved lower, back toward the lows seen in the wake of last week's softer-than-anticipated payroll print.

With the USD giving up ground against most major counterparts, the NZD bounced back through US$0.6220. With the NZD trading above AU$0.93, our attentions turn to Australian consumer and business confidence data as a key marker of economic sentiment, following 12 months of tightening financial conditions.

With the RBA leaving rates on hold earlier this month, we are keenly attuned to any rebound in sentiment that might help the AUD regain the momentum enjoyed following the June RBNZ policy announcement, as we turn our focus to the RBNZ’s latest policy offering Wednesday.