• The Kiwi bounces off 0.5840 and surges to 0.6000.
• Softer-than-expected US inflation data have crushed the USD.
• Stock markets rally on hopes of Fed easing over the coming months.

The New Zealand Dollar skyrocketed after the release of cooler-than-expected US inflation figures. The pair, which has been trading lower during the Asian and European sessions, bounced up at 0.5840 to hit session highs right above 0.6000.

The Dollar slumps as US inflation cools off

US inflation remained unchanged, at 0.4% against market expectations of a 0.6% reading, while year-on-year consumer prices eased to a 7.7% rate, well beyond the consensus 8%, following an 8,2% reading in September.

The core CPI, the Federal Reserve’s preferred gauge to assess inflationary pressures, which excludes volatile food and energy prices, has eased to 0.3% in October, from 0.6% in September, while the market had anticipated a softer decline to 0.5%. Year on year, the core CPI has retreated to 6.3% from 6.6% in September.

These figures increase evidence that inflation might have peaked, which eases the pressure for the Federal Reserve to maintain its aggressive monetary tightening cycle and boost expectations of a softer rate hike in December.

The USD and US Treasury bonds have dropped sharply. The US Dollar Index, which had appreciated more than 16% in 2022 so far, boosted by the US Fed’s hawkish stance, has lost about 2.2% after the data. Likewise, the benchmark US 10-year Treasury yield lost 30 basis points to 3.83%.

On the other hand, US stock markets have surged after the data, with the Dow Jones 2.5% up, the S&P500 appreciating 4% and the Nasdaq Index 5.42% above the opening levels.

Technical levels to watch