New Zealand Dollar hits fresh two-month highs past 0.5900 despite weak data from China 

• NZD/USD holds gains at two-month highs around 0.5820, favoured by generalised US Dollar weakness.
• China's Industrial Production and Retail Sales data for July hint at weak economic growth in Q3.
• A dovish repricing of the Fed's monetary policy keeps the Greenback sold across the board on Monday.

The New Zealand Dollar (NZD) keeps crawling higher against a weaker US Dollar (USD) with price action reaching the 0.5920 area for the first time since early June. Kiwi Dollar bulls did not flinch after a set of downbeat data from China on Monday and kept buying the pair, with the US Dollar depreciating amid shrinking bets of a Federal Reserve (Fed) rate hike in September.

Data released by the Chinese Bureau of Statistics revealed that Industrial Production growth slowed down to 4.5% in the year to July, below market expectations of a 5% growth, following a 5.3% year-on-year rise in June. Beyond that, Retail Sales slowed down to a 0.6% yearly growth in July, less than half the 1.5% growth expected, and following a 1% increase in the previous month.

These figures add to evidence that growth in the world’s second-largest economy is likely to remain sluggish in the third quarter of the year, as domestic demand fails to improve. Chinese authorities acknowledged that the extreme weather conditions have had some impact on growth, but that they have not changed the general development trend.

Fed repricing is hammering the USD

The New Zealand Dollar is drawing support from a soft USD, which has opened the week on the same weak tone that closed the previous one, weighed by a dovish repricing of the Fed monetary policy.

Analysts at ING highlight that Friday’s “softer set of US retail sales data for July has added to the case against the Federal Reserve hiking rates in September (...) and expectations for a 50bp tightening cycle into next year have been scaled back to 35bp.”

Looking ahead, Analysts at ING argue that “looking at the US data calendar this week, it is hard to see much changing.” The experts highlight the minutes from the 29 July FOMC meeting as the key event, recalling that this was the gathering that “saw a 9-3 vote for unchanged rates and a confusing press conference, which saw longer-dated Treasuries sell off.”