NZD/USD PRINTS V-SHAPE RECOVERY AS FOCUS SHIFTS TO US CORE PCE AND WAGE DATA

NZD/USD delivers a solid recovery from 0.6120 ahead of Fed’s preferred inflation gauge.

S&P500 futures have generated decent gains, portraying some recovery in the risk appetite.

Loosening labor market conditions would allow the RBNZ to maintain interest rates steady at 5.5%.

The NZD/USD pair finds stellar buying interest near 0.6120 after a sell-off in the European session. The Kiwi asset demonstrates V-shape recovery as the US Dollar has come under scrutiny ahead of the United States Q2 Employment cost index and core Personal Consumption Expenditure (PCE) price index data, which will be published at 12:30 GMT.

S&P500 futures have generated decent gains in the London session, portraying some recovery in the risk appetite of the market participants. US equities faced significant pressure on Thursday as the upbeat performance of the United States economy in the April-June quarter stemmed fears of an interest rate hike by the Federal Reserve (Fed) in September.

US Q2 Gross Domestic Product (GDP) and June’s Durable Goods Orders data remained robust, indicating solid momentum in consumer spending. Also, jobless claims remained lower last week, conveying that employment program by firms is maintaining momentum.

Going forward, investors will keep an eye on Fed’s preferred inflation gauge. The impact is expected to remain light as Fed officials will give more weightage to July’s PCE data for September policy. Analysts at BBH expect that headline PCE is expected at 3.0% y/y vs. 3.8% in May, while core is expected at 4.2% y/y vs. 4.6% in May.

On the New Zealand Dollar front, investors will focus on Q2 Employment data, which will release on Wednesday. NZ's jobless rate has remained at record lows consistently. Loosening labor market conditions would allow the Reserve Bank of New Zealand (RBNZ) to maintain interest rates steady at 5.5%.