• NZD/USD falls sharply on robust US consumer spending momentum.
• Fed policymakers are expected to maintain interest rates higher to ensure inflation declining towards 2%.
• The market mood remains downbeat as China’s GDP fails to meet estimates.

The NZD/USD pair has extended its downside to near 0.6100 as the United States Census Bureau has reported a better-than-projected Retail Sales report for December. The agency reported that consumer spending grew at a strong momentum of 0.6%, doubled from 0.3% growth in November. Investors projected that sales ticket at retailers rose by 0.4%.

An upbeat US Retail Sales data is expected to strengthen Federal Reserve (Fed) policymakers’ stance of maintaining interest rates at restricted levels for a period longer than expected by market participants.

The S&P500 is expected to open on a negative mood, considering weak cues from overnight futures. The US Dollar Index (DXY) has printed a fresh monthly high at 103.60 as investors seem uncertain about when the Fed will start reducing interest rates.

Meanwhile, investors await fresh guidance on interest rates from Federal Reserve (Fed) policymakers: Michael Barr, Michelle Bowman and John William. Fed policymakers are expected to deliver a hawkish guidance as inflationary pressures remain stubbornly higher in the December month.

The market mood remains downbeat due to weak post Covid recovery of the Chinese economy. The annual Q4 Gross Domestic Product (GDP) at 5.2%, missed market expectations of 5.3% but remained higher than the former reading of 4.9%. Quarter GDP grew at a slower pace of 1% as expected. In the third quarter, the Chinese economy was expanded by 1.3%. Being a proxy to China’s economic prospects, the New Zealand Dollar faces an intense sell-off.

The downbeat Electronic Retail Sales data for December has also impacted the New Zealand Dollar. The economic data was contracted by 2% and 0.6% on a monthly and an annual basis respectively.