Kiwi Rides Wave Of Risk Recovery But Data Show NZ Economy Cooling

Reprieve for risk sentiment supported NZD/USD in Thursday's Asia-Pac hours, with the pair entering consolidation phase through the rest of the day.

• Cross-asset impetus supported the kiwi, as major equity benchmarks in Europe and the U.S. climbed, while the VIX index retreated. The commodity complex recovered, with BBG Commodity Index staging a decent rebound from multi-month lows.
• The kiwi may have drawn some support from offshore catalysts. It was announced that Australian & Chinese chief diplomats will meet on the fringes of the G20 summit, raising the prospect of easing some geopolitical tensions in the region. On top of that, BBG reported that China is weighing a considerable boost to infrastructure funding to prop up its economy.
• Still, signs of headwinds to the local economy keep popping up, with ANZ Heavy Traffic Index down 2.7% M/M in June, which "suggests it’s a line ball call whether GDP managed to grow at all in the quarter." ANZ flagged a chance of a technical recession, given the slight contraction in output recorded in Q1, adding that "there are lots more GDP indicators to come."
• Furthermore, QV House Price Index released this morning showed the property market keeps cooling across New Zealand. QV flagged "rising interest rates and an oversupply of listings" as factors "putting downward pressure on prices."
• This draws attention to the RBNZ's next OCR review slated for Wednesday. There will be no updated forecasts or press conference this time. Despite the costs, the Bank is expected to continue lifting the OCR in a bid to curb inflation.
• Elsewhere, next week's data highlights include card spending (Monday) & BusinessNZ M'fing PMI (Friday).
• When this is being typed, NZD/USD trades flat at $0.6175. A break above Jul 4 high of $0.6252 would turn technical focus to $0.6327, which capped gains on Jun 24 & 27. Bears need a dip through Jul 5 low of $0.6125 before taking aim at May 22, 2020 low of $0.6081.