NZD/USD Testing 200-Day EMA, NZ-US 2y Swaps Back At 2020 levels

NZD/USD held onto gains made post CPI on Wednesday, finishing the session up 0.55% at 0.6083.The pair did hit a high of 0.6097 on the back of a weaker USD, the BBDXY ended the session down 0.32%.

• The NZD is currently resting right on 200-day EMA at 0.6082, while the 14-day RSI holds below 50 at 46 and the MACD indicator is showing descending bars.
• Weaker-than-expected 2Q inflation in New Zealand, with CPI gains slowing to 3.3% from 4.0% in 1Q, suggests the RBNZ may need to cut rates as early as August to prevent a triple-dip recession, as indicated by declining business and consumer confidence and cooling migration and spending trends.
• The OIS market is pricing a 46.5% chance of a cut in August, and a 80% chance of a cut in October for a cumulative 31.5bps of cuts.
• The NZ-US 2yr swap spread made new yearly lows on Wednesday reaching -2bps, we currently trade at -4bps levels not seen since November 2020
• Equities had a rough session with the Nasdaq down 2.77% while S&P 500 finished down 1.39%. Semiconductors were the worst performing sector with the Philadelphia SE Semiconductor Index falling 6.81%, this was on the back of the Biden administration considering stringent trade restrictions on companies if they continue providing advanced semiconductor technology to China.
• Expiries: 0.6040 (NZD0500m) for 18th July NY cut. Upcoming notable strikes: 0.6050 (NZD527m July 19), 0.5650 (NZD350m July 19)
• The calendar is light on for the remainder of the week, there will be some NZGB auctions later today.