NZD/USD remains awaiting US data.

• NZD/USD bears are in town with a stronger US dollar.
• The RBNZ took a hawkish tone, but US data dominates.

The pair NZD/USD It has risen 0.11%, but it has come under pressure after the publication of the minutes of the Federal Open Market Committee, in which some participants were in favor of raising rates by 50 basis points, which has caused a rise in the dollar, but it has left the US Treasury yield relatively stable.

Markets have been forced to reassess interest rate expectations, not only upwards, but also questioning the view that once rate ceilings are reached, central banks will move quickly to cut interest rates,” said the ANZ Bank analysts in a note Thursday morning on Asia.

Early signs for 2023 are that economic activity is more resilient than fourth quarter data suggests and that monetary tightening is not yet affecting overall economic activity.” Economic resilience is commendable, but banks centrals are uncomfortable with current levels of aggregate spending and labor market demand”.

They need to stay hawkish and are not yet in a position to declare interest rates “restrictive enough.” If the upcoming February data in the US confirms the strength of economic activity, it is difficult for risk to pick up in the short term.”

The market expects the main data for January to remain at 5.0% year-to-year, in line with the previous month,” say the Rabobank analysts, “which would reinforce concerns that the downward trend in the indicators of inflation has stagnated.

Data in line with market expectations would reinforce the view that the Fed will have to do more to bring inflation back to its target level. Currently, implicit market rates point to a top for Fed funds near 5.33%”.

Domestically, the overall tone of the Reserve Bank of New Zealand’s statement yesterday remained hawkish, noting that they leaned heavily on economics over emotions, ANZ Bank analysts said today. .

They also highlighted the long-term inflationary risks surrounding a recovery from the cyclone, which speak to stronger activity and a higher OCR. There is not enough information available yet, but over time, that could play into the NZD’s strength in the coming meetings.”