The New Zealand economy expanded by 1.7% q/q in the second quarter, in a vast improvement over the 0.2% contraction it had registered in Q1. On a year-over-year basis, GDP grew by just 0.4%, compared to 1.2% prior, but the figure was still better than expected.
Today's release underlines the resilience of the economy, while the labor market is very strong, as Unemployment stood at 3.3% in Q2. This has allowed the central bank (RBNZ) to carry on with its aggressive monetary tightening and stay hawkish, in order to fight inflation, which soared to 7.3% in Q2.
The Reserve Bank of New Zealand delivered its seventh rate hike last month and fourth consecutive of 50 basis points, bringing the official cash rate (OCR) to 3% . Officials had pointed to more moves ahead and upgraded their forecasts, projecting the OCR at 3.7% by the end of the year. 
NZD/USD however remains at the mercy of the US Dollar and hit the lowest level since May 2020 on Tuesday, after the hot CPI inflation report from the United States.
Markets largely expect another outsized 75 basis points rate increase by the Fed next week, but Tuesday's report has put an even bigger 1% move in play, with CME's Fed Watch Tool assigning probabilities of 70% and 30% in those two outcomes respectively. 
The Kiwi is now vulnerable to 0.5939-20 region, although sub-0.58400 moves may prove elusive in the near-term. On the other hand, NZD/USD catches a breath today and it may get the chance to reclaim mid-0.6000s, but a strong catalyst will be required in order to surpass the EMA200 that would pause downside bias.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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