NZD: Retail sales falls sharply
Retail sales in New Zealand for May fell by 1.2% m/m against expectations of a 0.1% m/m rise and follows on from a 1.2% m/m rise in April. It was the largest percentage decline since February 2004. The data is a reminder of the difficult predicament that the RBNZ finds itself hand with slowing growth on one hand, but elevated inflation on the other. While our NZ economist believe that the RBNZ will begin its rate cut cycle in September with a 25bp move, the risks remain for a July 24 start or for a more aggressive move. This will keep the NZD under pressure and we maintain our 3-month target for AUDNZD at 1.27. NZ CPI is due later today at 2245 GMT (tomorrow morning local time). The market expects a rise of 1.4% q/q, up from 0.7% q/q in Q1.