NZD/USD falls as US data fuels Fed rate hike speculation

• US retail sales for August rose 2.6% year-on-year, below estimates but a sign of the resilience of consumer spending.
• The Producer Price Index rose 1.6% year-on-year in August, doubling the July figure and exceeding market expectations.
• The New Zealand Manufacturing PMI is expected to contract for the sixth consecutive month, which will add headwinds to the NZD/USD pair.

He US dollar (USD) recovers from New Zealand dollar (NZD) on Thursday as the NZD/USD pair loses 0.13% following the release of United States (US) data. The pair is trading at 0.5910 after reaching a daily high of 0.5944.

NZD/USD faces downward pressure as US economic indicators point to a resilient economy, raising the odds of a Fed rate hike

The latest data released during the day showed that the US economy remains resilient, as consumer spending keeps investors hopeful that the Federal Reserve will achieve a soft landing despite keeping interest rates higher for longer. .

The US Commerce Department revealed that August retail sales rose 2.6% year-on-year, below July’s downwardly revised 2.6% figures, and missing estimates of 2.9%. Digging deeper into the data, core retail sales, which exclude volatile items, grew 0.2%, below forecasts of 0.6%.

At the same time, the US Bureau of Labor Statistics (BLS) revealed the Producer Price Index (PPI) for the same period mentioned. The PPI rose 1.6% year-over-year in August and beat estimates of 1.2%, doubling the 0.8% increase in July. Other data announced by the BLS showed that Initial Jobless Claims for the week ending September 9 rose to 220,000, below the consensus of 225,000, underscoring a hot labor market.

Based on NZD/USD’s reaction to the data, market participants believe there will be another rate hike from the Fed before the end of the year. CME’s FedWatch tool shows the Fed would not raise rates at the September meeting. But by November, there is a 35% chance that the US central bank will raise rates.

In New Zealand (NZ), traders are preparing for the release of manufacturing PMI data. Although most PMIs released around the world suggest an ongoing economic slowdown, New Zealand is not immune. The New Zealand PMI has contracted for five consecutive months, and the trend is expected to extend into August, with estimates of 46.0.

Additionally, NZ’s main trading partner China is expected to release retail sales and industrial production. If the data is positive and exceeds previous readings, this could give a boost to the NZD/USD pair.

NZD/USD Price Analysis: Technical Outlook

Following today’s data, the pair posted a new two-week high, which NZD/USD sellers used to open new short positions, as the pair turned lower and fell towards the 0.5910 area, while the price was beginning to form an inverted hammer. A decisive break below 0.5900 could open the door to testing the year-to-date low of 0.5859. On the other hand, the pair would turn neutral if the NZD bulls reclaim 0.6000.