• NZD/USD fades bounce off intraday low even as New Zealand trade numbers improved in December.
• New Zealand Trade Balance and Exports grew, Imports eased in December.
• Cautious mood ahead of bumper data/events exerts downside pressure on Kiwi price.
• China’s return from one-week-long holidays could entertain traders.

NZD/USD prints mild losses around 0.6480, holding lower grounds near the intraday bottom following the week-start gap-down. In doing so, the Kiwi pair fails to cheer the upbeat New Zealand (NZ) trade data, as well as portray the market’s cautious mood ahead of this week’s key data/events.

New Zealand’s headlines Trade Balance improved to $-475M MoM for December versus $-2,108M prior while the yearly figure rose to $-14.46B compared to $-14.98B previous readings. Further details suggest that the Imports eased to $7.19B compared to $8.52B whereas the Exports increased to $6.72B for December compared to $6.34B prior.

On the other hand, the better-than-expected fourth-quarter (Q4) Gross Domestic Product (GDP) and the Core Personal Consumption Expenditures (PCE) Price Index for December gained major attention. However, the actual releases were softer than their previous outcomes and hence signaled that the Federal Reserve’s (Fed) front-loading of interest rates has finally helped exert downside pressure on spending and inflation fears.

The aforementioned catalysts built market forecasts that the Fed may rethink its aggressive rate and the policy pivot. It’s worth observing, however, that the figures like Durable Goods Orders for December and Weekly Initial Jobless Claims were joined by the last comments from the Fed policymakers resisting policy pivot to keep the hawks hopeful, which in turn weighed on the Gold price.

Talking about the data, the Federal Reserve's preferred gauge of inflation, namely the Core Personal Consumption Expenditures (PCE) Price Index, matched 4.4% YoY market forecast versus 4.7% prior while the monthly figure rose to 0.3% versus 0.2% expected and previous readings. Further, the US Bureau of Economic Analysis' (BEA) first estimate of the US fourth quarter (Q4) Gross Domestic Product marked an annualized growth rate of 2.9% versus 2.6% expected and 3.2% prior. On the same line, the Durable Goods Orders jumped 5.6% in December versus 2.5% market forecast and -1.7% upwardly revised prior. Furthermore, the growth of Personal Consumption Expenditures Prices weakened to 3.2% QoQ in Q4 compared to 4.3% marked forecast and prior readings. Further, Core Personal Consumption Expenditures eased to 3.9% QoQ for Q4 from 4.7% previous readings, versus 5.3% expected.

Amid these plays, the US 10-year Treasury bond yields managed to snap a three-week south-run while posting 0.60% weekly gain to 3.50% by the end of Friday. Wall Street benchmarks, on the other hand, printed mixed weekly close. Furthermore, the US Dollar Index (DXY) managed to post the lowest weekly loss in three, down 0.07% to 101.92 at the latest, despite posting the third weekly downtrend and refreshing the eight-month low.

Having witnessed the initial reaction to New Zealand data, the NZD/USD pair traders should pay attention to China’s return and the reaction to the last week’s mostly upbeat US statistics, as well as preparations for this week’s Federal Reserve (Fed) decision. It’s worth noting that softer New Zealand inflation data has already reduced the importance of this week’s Q4 NZ jobs report. Other than the Fed decision, the US employment data for December and China’s official activity numbers for the said month will also be crucial for near-term directions.