NZD/USD steadies near 0.5850 after Q2 Retail Sales data

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NZD/USD edged lower after registering gains in the previous session, trading around 0.5860 during the Asian hours on Monday. The pair holds losses following stronger Retail Sales data for the second quarter.

NZD/USD moves little following the Q2 Retail Sales data released on Monday.
New Zealand’s Retail Sales rose 0.5% QoQ in Q2, exceeding a 0.2% gain expected.
The CME FedWatch Tool indicates an 87% chance of a 25-basis-point rate cut in September.

Retail Sales in New Zealand climbed 0.5% quarter-on-quarter in the three months to June, easing from a 0.8% increase in the first quarter but exceeding market expectations of a 0.2% gain. Meanwhile, Retail Sales ex Autos rose 0.7% for the same period, following 0.4% gains in the previous period.

Last week, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 25 basis points to a three-year low of 3%, signaling the possibility of further easing to support the weak economy. Prime Minister Christopher Luxon criticized the move, arguing that the central bank should have acted more aggressively to spur growth.

The US Dollar (USD) may face challenges due to the rising likelihood of a Federal Reserve (Fed) interest rate cut in September, driven by the comments from Fed Chair Jerome Powell at the Jackson Hole symposium on Friday. The Fed Chair Powell stated that risks to the job market were rising, but also said inflation remained a threat and that a decision wasn't set in stone.

According to the CME FedWatch tool, traders are now pricing in nearly an 87% odds of a 25 basis points (bps) rate cut in September, up from 75% before the speech. Traders will likely await the upcoming release of the Q2 US Gross Domestic Product Annualized and July Personal Consumption Expenditures - Price Index data, the Fed's preferred inflation gauge.

Economic Indicator

Retail Sales (QoQ)

The Retail Sales data, released by Statistics New Zealand on a quarterly basis, measures the volume of sales of goods by retailers in New Zealand. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the QoQ reading comparing sales volumes in the reference quarter with the previous quarter. Generally, a high reading is seen as bullish for the New Zealand Dollar (NZD), while a low reading is seen as bearish.

Why it matters to traders?

The quarterly release of Retail Sales by the Statistics New Zealand directly reflects on the country’s consumer spending. Stronger sales could drive inflation higher, leading the Reserve Bank of New Zealand (RBNZ) to hike interest rates so as to maintain its inflation-containment mandate. Thus, the indicator impacts the New Zealand dollar significantly. A better-than-expected print tends to be NZD bullish. The data is published about a month and a half after the quarter ends.