Kiwi Soars Past $0.6400 After U.S. CPI

The release of below-forecast U.S. CPI data generated a strong tailwind for NZD/USD Wednesday as hawkish Fed expectations moderated.

• The greenback went offered across the board as participants revised their views on the most likely Fed tightening trajectory, even as a couple of policymakers insisted that rate hikes will continue into next year. Meeting-dated OIS prices 60bp worth of tightening for the FOMC's September meeting as the dust settles after Wednesday's repricing.
• The kiwi drew additional support for the broader appetite for risk, which came on the back of U.S. inflation figures. Equity benchmarks in Europe and the U.S. jumped, while the VIX index fell below the 20 mark for the first time since Apr. The risk-on impetus resulted in a firmer commodity complex, which filtered through into the related segment of G10 FX basket (save for the CAD).
• NZD/USD ripped through consecutive bullish technical targets such as Aug 1 high of $0.6353 and Jun 16 high of $0.6396 before the rally ran out of steam just ahead of the 100-DMA. The pair printed its best levels since Jun 10, while its implied 1-month volatility sank to the lowest point since Apr 22.
• The spot rate last changes hands at $0.6409, up 6 pips on the day. A clearance of the 100-DMA at $0.6442 would support the bullish case, clearing the path to Jun 3 high of $0.6576. Conversely, a fall through the $0.6200 area would turn the spotlight on Jul 14 low of $0.6061 again.
• The local data docket is empty during the remainder of the day, with BusinessNZ M'fing PMI & RBNZ survey of household inflation expectations coming up tomorrow.