• NZD/USD takes offers to pare the biggest daily gains in two weeks around six-month high.
• NZ HYEFU forecasts three quarters of negative GDP growth for New Zealand.
• RBNZ defends rate hike forecasts by expecting higher levels of employment, inflation.
• US inflation bolstered calls for Fed’s 50 bps rate and less-hawkish policy in 2023 but surprises can’t be ruled out.

NZD/USD justifies downbeat Half Year Economic and Fiscal Update (HYEFU) from New Zealand (NZ) to refresh intraday low near 0.6440 during early Wednesday. Even so, statements from the Reserve Bank of New Zealand (RBNZ) and the cautious mood ahead of the key Federal Open Market Committee (FOMC) monetary policy meeting challenge the pair sellers of late.

NZ Treasury sees three quarters of negative Gross Domestic Product (GDP) growth in the current fiscal year 2023 (CY23), reported Reuters. The news also mentioned that New Zealand on Wednesday predicted a budget deficit of NZ$3.63 billion ($2.34 billion) for the fiscal year ending June 30, 2023, narrower than a deficit of NZ$6.63 billion forecast in the country’s budget in May.

Following the downbeat announcements, the RBNZ crossed wires, via Reuters, while stating, “Even with the expected slowdown in the period ahead, it is anticipated that the level of employment will remain high.” The New Zealand central bank also mentioned that actual and expected inflation is too high and needs to be reduced.

It should be noted, however, that the latest fears emanating from China, mainly due to the global and internal pessimism surrounding the Covid conditions, seem to favor the NZD/USD to consolidate the previous day’s gains. The International Monetary Fund (IMF) Managing Director Kristalina Georgieva was spotted expecting slower economic growth for China due to the latest jump in the daily Covid cases. Additionally, Bloomberg came out with the news suggesting that the Chinese leaders delayed the economic policy meeting due to the COVID-19 problems. On the same, the Asian Development Bank (ADB) cut China’s 2023 economic growth forecast to 4.3% from 4.5% estimate in September.

On Wednesday, the US Dollar Index (DXY) slumped after downbeat US Consumer Price Index (CPI) that dropped to 7.1% YoY in November versus the 7.3% expected and 7.7% prior. Further, the CPI ex Food & Energy, known as the Core CPI, also declined to 6.0% YoY during the stated month compared to 6.1% market forecasts and 6.3% previous readings. “Traders of futures tied to the Federal Reserve’s policy rate boosted bets Tuesday that the U.S. central bank will notch down its interest-rate hike pace further early next year, after a government report showed inflation eased sharply in November,” said Reuters following the data.

Against this backdrop, Wall Street closed positive but the S&P 500 Futures struggle for clear directions. Further, the US Treasury bond yields also remain sidelined after declining the most in a week to snap a three-day uptrend.

Moving on, pre-Fed anxiety could restrict NZD/USD moves but fears of a hawkish surprise can keep the bears hopeful at the multi-day high.

Also read: Fed December Preview: Will US Dollar selloff continue?

Technical analysis

Overbought RSI (14) joins failure to provide a daily closing beyond the key 0.6480 hurdle, comprising tops marked in August and so far in December, to challenge NZD/USD buyers.

Also read: NZD/USD Price Analysis: Bulls need clear break of 0.6480 to keep the driver’s seat