Kiwi Draws Incremental Support From Inflation Data, Greenback Sags Lower

New Zealand's expectation-busting inflation print fanned hawkish RBNZ bets, providing a key data input ahead of the August Monetary Policy Statement. Headline inflation accelerated to +7.3% Y/Y (32-year high), surpassing BBG median estimate of +7.1% and the +7.0% forecast in the May MPS.

• The RBNZ's own gauge of core inflation reaffirmed the view that price pressures have intensified. Sectoral factor model inflation quickened to a record high of +4.8% Y/Y, with readings for the three preceding quarters revised higher.
• The market reacted by adding hawkish RBNZ tightening bets, with benchmark NZ 2-year swaps rising to a new monthly high & NZGB yield curve bear flattening.
• Several sell-side desks reconsidered their RBNZ calls. ANZ said they now forecast a terminal OCR level of 4.0% (prev. 3.5%) and warned that "a 75bp hike at the August MPS is a very real possibility," while ASB lifted their projection of OCR peak to 4.75% from 3.50%.
• The kiwi dollar caught a bid as StatsNZ published its CPI report, albeit reaction to sectoral factor model inflation was virtually non-existent. That said, the currency's strength gradually petered out, with AUD/NZD returning to neutral levels.
• The greenback remained the worst performer among major currencies throughout the Asia-Pac session, with regional players playing catch-up with U.S. data/Fedspeak from after local hours Friday.
• Traditional safe havens JPY and CHF struggled for any topside impetus as U.S. e-mini futures crept higher.
• Japanese financial markets were closed in observance of a public holiday, limiting liquidity in the timezone.
• The global data docket remains feather-light after Asia hours. BoE's Saunders is the only G10 central bank member due to speak.