• NZD/USD bears move in as profit-taking ensues. 
• The markets will look to he the NZ Half Year Economic and Fiscal Update on Wednesday and the Fed.

NZD/USD is higher by some 1.29% on the day as the markets take profits following a volatile spell on Wall Street and US data that showed softer inflation pressures in the month of November.

Both the Australian and New Zealand Dollars were tracking global shares higher into the US Consumer Price Index and rallied strongly when the data pointed towards a Federal Reserve pivot. 

US CPI below the mark

• US CPI MoM Nov: 0.1% (est 0.3%, prev 0.4%).
• US CPI Ex Food And Energy MoM Nov: 0.2% (est 0.3%, prev 0.3%).
• US CPI YoY Nov: 7.1% (est 7.3%, prev 7.7%).
• US CPI Ex Food And Energy YoY Nov: 6.0% (est 6.1%, prev 6.3%).

The Consumer Price Index has led to the markets pricing the terminal Fed rate down to 4.86% vs 4.98% prior to the report. Consequently, US stocks on Wall Street opened bid in the cash market with the NASDAQ jumping over 400 points and rallying over 3.3%. However, there has been a sharp turnaround in markets that have resulted in a reversal in the Kiwi as well. 

 ''This is likely just the first leg of volatility to be expected this week, with the Fed decision,'' analysts at ANZ Bank argued. ''Markets are now obviously going into it with a very dovish mindset – that’ll be fine if the Fed are dovish, but that doesn’t align at all well with recent comms, especially with US services inflation still rising, and the labour market so tight, and we may be in for a bumpy ride.''

''We get the he Half Year Economic and Fiscal Update today. This isn’t usually something FX markets watch, but if we do get extra bond supply, it could drive NZ interest rates up further, and that might be viewed in some quarters as a positive for the NZD.''