Kiwi Fails To Hold Onto Post-CPI Gains

Expectation-busting inflation figures released out of New Zealand on Monday prompted participants to step up hawkish RBNZ wagers. Better risk backdrop in Asia lent further support to NZD/USD, sending it as high as to $0.6201, but demand petered out into the London morning. The kiwi struggled to find poise anew in European & U.S. hours, finishing the day as the worst G10 performer.

• The deterioration in risk appetite clipped the kiwi's wings later in the day, as U.S. equity benchmarks plunged into the red, while the VIX index crept higher.
• Evidence that price pressures in New Zealand remain acute may have fuelled fears of a hard landing for the local economy, dampening the impact of bolstered near-term tightening expectations.
• Note that ANZ and ASB both raised their terminal OCR level forecasts and both flagged a risk of a 75bp hike in August, although it is not their base-case scenario.
• New Zealand's trade data (Thursday) & credit card spending (Friday) take focus from here. Elsewhere, worth paying attention to the minutes from the RBA's most recent monetary policy meeting & comments from RBA's Bullock, both due today.
• NZD/USD last trades flat at $0.6155. A clean break above yesterday's high/Jul 8 high of $0.6201/07 would bring Jul 4 high of $0.6252 into play. Bears need a retreat under Jul 14 low of $0.6061 before setting their sights on the $0.6000 mark.