New Zealand Retail Sales beat expectations, NZD/USD supported at 0.6890

New Zealand Retail Sales volumes rose a seasonally adjusted 3.3 percent in the second quarter, data from Statistics New Zealand showed on Tuesday, putting sales 33.3 percent higher on the year.

The kiwi is little change don the data, testing short term support structure at 0.6890 to the US dollar. 

While New Zealand data continues to impress, the concerns are for the resurgence of covid in the nation.

Authorities recently announced a snap lockdown after one man tested positive in Auckland with the Delta variant.

This has been extended by three days until midnight on 27 August, while Auckland, the epicentre of the latest outbreak, will have restrictions until at least 31 August.

There had been more than 320 locations of interest linked to the outbreak and 13,000 contacts recorded - far more than previous outbreaks.

Prime Minister Jacinda Ardern said more certainty is needed about the highly transmissible Delta variant of coronavirus.

"The safest option for all of us right now is to hold the course for longer," Ms Ardern said.

"If the world has taught us anything it is to be cautious with this variant of COVID-19."

Ms Ardern also said the current outbreak of the Delta variant had not yet peaked.

She said there had been more than 320 locations of interest linked to the outbreak and 13,000 contacts recorded - far more than previous outbreaks.

"Delta has changed the rules of the game," she added.

This leaves the bar low for downside in the currency despite solid data will be subject to some disruption the longer the lockdowns persist should the spread gather momentum.

Against this backdrop, the Reserve Bank stayed pat at its last meeting and a series of rate hikes remain on the cards,

''The ultimate impact of lockdowns depends on the length of time spent at each alert level. In a short successful lockdown, a large proportion of spending ends up being delayed rather than lost altogether. But the longer the lockdown, the less likely that lost activity will be caught up at a later date,'' analysts at Westpac explained. 

However, the analysts make the case for rate hikes to come in November.

''As we’ve seen over the past year, economic activity has tended to bounce back quickly once restrictions are lifted. And if that does happen again, the RBNZ will soon be confronted with many of the same issues that it faced before – an economy that is running up against capacity constraints and which is at risk of a more sustained period of inflation pressures.''

''We now expect these to begin in November.''