Kiwi Loses Altitude, Jobs Market Data Up Today

NZD/USD retreated on Tuesday, pressured by a mixture of negative risk dynamics, a dovish tweak to the RBA's guidance and fresh rounds of hawkish Fedspeak.

• Geopolitical angst surrounding U.S. House Speaker Pelosi's visit to Taiwan limited demand for riskier assets, with Beijing announcing a series of military drills around the island.
• The kiwi was hit by spillover from AUD sales after the RBA delivered an expected 50bp rate hike, but said it was not on a pre-set path re: policy normalisation, adding that future decisions will be data-dependent.
• Comments from Fed members on Tuesday reaffirmed the central bank's intentions to keep lifting interest rates and contain inflation, prompting participants to add hawkish FOMC bets.
• Commodity markets were softer, with the aggregate BBG Commodity Index falling to a one-week low. The GDT Price Index fell 5.0% at the latest auction, led by a notable (6.1%) decline in whole milk powder.
• NZD/USD has extended losses this morning and last deals at $0.6256, down 13 pips on the day. The low print of Jul 14 ($0.6061) provides the nearest firm support, a break here would reinstate the broader downtrend. Bulls need a rally above Jun 16 high of $0.6396 to confirm that topside momentum is building.
• Evidence of rapid cooling in New Zealand's property market keeps coming in. The latest CoreLogic House Price Index report revealed that the decline in house prices over the three months through end-Jul was largest quarterly fall since the GFC. Still, CoreLogic said they do not expect a property crash, with bringing inflation under control likely to remain the RBNZ's "number one priority."
• New Zealand's Q2 labour force survey will hit the wires shortly and, as flagged before, it will be one of the key data inputs to this month's Monetary Policy Statement. The unemployment rate is expected to have edged lower to 3.1% in Q2 from a record low of 3.2% recorded in Q1, according to Bloomberg consensus forecast. Note that the rate has generally been printing below median estimates since 4Q2019 (save for 3Q2020 & 3Q2022 when it matched forecasts).