NZD Flat Near Multi-Month Highs, Outperforms Weak Retail Sales Data

The New Zealand dollar traded flat near recent multi-month highs against the US dollar on Monday, last at 0.59594. Despite earlier data showing New Zealand's second-quarter retail sales fell 0.5% quarter-on-quarter, far worse than the market's expected 0.1% decline, the kiwi only dipped slightly intraday before stabilizing, retaining its recent gains overall.

**Weak Retail Data Fails to Trigger Selling**

Statistics New Zealand data showed retail sales fell 0.5% quarter-on-quarter in the second quarter, with the prior reading revised up to 1.0% growth from 0.9%. Retail sales excluding autos rose 0.7% quarter-on-quarter, slowing from 1.1% in the first quarter. Following the release, NZD/USD briefly dipped to around 0.5970, but the decline was quickly recovered, indicating a limited market reaction to the single data point. Analysts at MUFG noted that current market pricing for RBNZ rate cuts may be overly aggressive, which to some extent limits the downside for the kiwi.

**External Factors Provide Support**

On the US dollar side, ongoing geopolitical tensions between the US and Iran provided some support for the safe-haven dollar, but did not exert significant pressure on the kiwi. Reports indicated Iran's foreign minister dismissed the latest US economic sanctions threat as a "desperate" tactic. Meanwhile, market reports showed the Australian dollar gained support from energy prices and an underpriced RBA policy path, which indirectly lifted sentiment for the kiwi as a fellow commodity currency.

**Focus Shifts to US Inflation Data**

Traders are awaiting the US July personal consumption expenditures price index due later this week, which will provide key clues on the Fed's subsequent policy path. Ahead of that, NZD/USD is expected to fluctuate within a range around 0.59594, with the 0.6000 level remaining a key resistance overhead.