The NZD/USD pair faces downward pressure as sticky US inflation drives Treasury yields above 5% and fuels expectations for a December Fed rate hike, while fading RBNZ tightening prospects further weigh on the Kiwi.
The pair fell 0.68% on Wednesday to around 0.5565 after hotter-than-expected October US CPI (0.4% MoM headline vs 0.3% expected, 0.3% core vs 0.2% expected) lifted December Fed hike odds to about 85%. A 10-year Treasury yield above 5% and fading RBNZ tightening expectations add downward pressure, though oversold RSI near 25 hints at a possible corrective bounce.
The hot October CPI beat (0.4% MoM headline vs 0.3% expected) triggered a sell-off in US government bonds on Tuesday, pushing the 10-year yield above 5%. Persistent inflation and ~85% December hike odds argue for continued upward pressure on the yield.
The New Zealand Dollar dropped 0.68% on Wednesday to 0.5565 as hotter-than-expected US inflation data bolstered the US Dollar. October headline CPI rose 0.4% MoM, exceeding the 0.3% forecast, which pushed the 10-year US Treasury yield above 5% and raised the probability of a December Federal Reserve rate hike to approximately 85%.
Stronger-than-expected US inflation data raised expectations of a December Fed rate hike to about 85%, lifting the US Dollar and the 10-year Treasury yield above 5%, while expectations of RBNZ tightening are being scaled back on lower oil prices.
The RSI(14) near 25 signals oversold conditions, and holding above supports at 0.5555, 0.5544 and 0.5527 could allow a rebound toward 0.5573-0.5609, but the near-term bias remains bearish.
Investors sold US government bonds after US inflation for October came in above forecasts (0.4% MoM headline vs 0.3% expected), raising odds of a December Fed rate hike to roughly 85%.