• NZD/USD pulled back under 0.6800 on Thursday after finding resistance at its 50-DMA at 0.6816 a day earlier.
• The kiwi is a modest G10 underperformer after NZ CPI data came in not quite as hot as feared.
• But the RBNZ is still expected to press ahead with aggressive tightening in the coming quarters.

The New Zealand dollar was a modest G10 underperformer on Thursday, as traders pulled back slightly on their expectations for RBNZ interest rate hikes in the coming years after not as hot as feared Q1 inflation figures. Inflation surged 1.8% QoQ in New Zealand in Q1, according to the latest Consumer Price Index (CPI) figures, while the YoY rate of inflation jumped to 6.9%, its fastest rate since 1990. But that missed expectations for a 2.0% QoQ and 7.1% YoY rise in the CPI.

After hitting resistance in the form of the 50-Day Moving Average at 0.6816 on Wednesday, NZD/USD has reversed back into the 0.6780s, where it trades lower on the day by about 0.3%. Most analysts agreed that, even if the latest inflation figures were not quite as hot as feared, the RBNZ is still very likely to raise interest rate by 50 bps again at its next meeting in May, following last week’s 50 bps rate rise to 1.50%.

As a result, kiwi underperformance has been modest. Looking ahead, NZD/USD traders are bracing for commentary from Fed Chair Jerome Powell later in the session and he is expected to solidify expectations for 50 bps rate moves at the Fed’s next few policy meetings. USD risks seem tilted to the upside and the NZD/USD bears will be eyeing a potential retest of this week’s lows in the 0.6720 area.