Breaking: New Zealand CPI inflation up 1.8% in the three months to September


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Inflation in New Zealand, as measured by the change in the Consumer Price Index (CPI), rose to 1.8% in the three months to September,  Statistics New Zealand reported on Tuesday. This reading came in slightly below the market expectation of 2%. The annual comparison posted 5.6%, below the previous 6% and missing the market forecast of 5.9%.

The New Zealand Dollar (NZD) fell with the news, with NZD/USD down towards the 0.5900 level as an immediate reaction to the news. 

New Zealand Dollar price today

The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the US Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.36% -0.51% -0.27% -0.51% -0.02% -0.33% -0.24%
EUR 0.37%   -0.15% 0.11% -0.13% 0.35% 0.05% 0.12%
GBP 0.51% 0.14%   0.24% 0.03% 0.48% 0.19% 0.24%
CAD 0.27% -0.10% -0.23%   -0.24% 0.24% -0.06% 0.03%
AUD 0.49% 0.14% -0.02% 0.21%   0.45% 0.15% 0.19%
JPY 0.03% -0.32% -0.47% -0.26% -0.46%   -0.30% -0.26%
NZD 0.32% -0.03% -0.19% 0.06% -0.16% 0.30%   0.02%
CHF 0.25% -0.09% -0.24% -0.01% -0.24% 0.24% -0.07%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

 


This section below was published as a preview of New Zealand Consumer Price Index at 21:45 GMT

  • The annual inflation rate in New Zealand is expected to decline from 6% in the quarter to June to 5.9% in the three months to September.
  • Markets expect inflation to come in at 2% in Q3 compared with the previous quarter, accelerating from the 1.1% recorded in Q2.
  • NZD/USD appears vulnerable following a reversal from two-month highs, moving towards recent lows.

Stats NZ will release on Monday, October 16, at 21:45 GMT, early Tuesday in New Zealand, the Consumer Price Index (CPI) data for the September quarter. The data could be relevant for the New Zealand Dollar (NZD) and the Reserve Bank of New Zealand (RBNZ), which will hold its next monetary policy meeting on November 28-29. 

Annual inflation in New Zealand peaked in June 2022 at 7.3%. Price growth has slowed during 2023, coming in at 6% in the quarter to June, but it remains above the target range of the RBNZ, which is set between 1% and 3%. 

In the second quarter and compared to the previous three-month period, inflation rose by 1.1%, slightly lower than the 1.2% recorded in the previous quarter but higher than the market consensus of 0.9%. Despite persistently high inflation, the RBNZ has maintained the Official Cash Rate unchanged at 5.5% during the last three meetings.

What to expect from New Zealand’s inflation rate? 

The Consumer Price Index (CPI) is expected to have increased by 2% in the third quarter compared with the previous three-month period, accelerating from the 1.1% advance recorded in the second quarter. It would be the first acceleration in the quarterly rate since Q3 of last year. The annual rate is expected to have modestly declined from 6% to 5.9% by the end of September. Such figures, or even a negative surprise with higher-than-expected numbers, will add pressure to the RBNZ, indicating that the current interest rate of 5.50% may not be sufficient to bring inflation back to the target within an acceptable time frame.

“The Committee agreed that monetary conditions are restricting spending and reducing inflationary pressure as anticipated. While supply constraints in the economy continue to ease, inflation remains too high. Spending needs to remain subdued to better match the economy’s ability to supply goods and services so that consumer price inflation returns to its target range”, the RBNZ said at its last meeting on October 4. 

The market expects the RBNZ to keep rates unchanged at the November meeting but sees another rate hike in February. A higher-than-expected inflation reading could bring forward rate hike expectations to the November meeting. Conversely, a significant slowdown in inflation would dampen expectations of an immediate rate hike.

On Saturday, New Zealand held elections, and Christopher Luxon is expected to become the next prime minister. As the results are still being determined, how the government will be composed remains unclear. Uncertainty surrounding the government formation and the election had a limited impact on markets.


When will the Consumer Price Index report be released, and how could it affect NZD/USD?

The Q3 Consumer Price Index (CPI) inflation data will be published at 21:45 GMT on Monday. The NZD/USD pair reached its highest level in two months, above 0.6050, but then experienced a sharp reversal driven by a stronger US Dollar and risk aversion, falling sharply to levels below 0.5900. This reversal has shifted the short-term outlook to neutral.

The main driver of the decline was the Greenback. The US Dollar has remained firm in the market, supported by the latest round of US economic data, which indicates a resilient economy, a tight labor market, and inflation still above the target.

If the NZ inflation numbers exceed market consensus, it could increase expectations for a rate hike at the next RBNZ meeting, leading to a stronger Kiwi. However, a more significant upside surprise in that direction could damage New Zealand's economic growth outlook and, therefore, impact the Kiwi negatively.

The short-term outlook for NZD/USD shows risks tilted to the downside, but losses seem limited as long as the pair stays above the critical support area at 0.5860. A break below would open the doors to further losses, with the next target around 0.5800.

On the upside, the 20-day and 55-day Simple Moving Averages (SMA) are around the 0.5955 zone, making it a significant area of interest. The next resistance level is positioned at 0.5980. However, the critical level to watch is at 0.6050, as it represents recent highs and the 20-week SMA, which acted as a resistance level the previous week. A consolidation above this area would suggest the potential for further gains, with a target set at 0.6150.

New Zealand Dollar FAQs

What key factors drive the New Zealand Dollar?

The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

How do decisions of the RBNZ impact the New Zealand Dollar?

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

How does economic data influence the value of the New Zealand Dollar?

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

How does broader risk sentiment impact the New Zealand Dollar?

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

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