NZ CPI supports analysts forecast for a series of rate hikes from RBNZ

Ross J Burland FXStreet

New Zealand Consumer prices rose 2.2% in the September quarter, taking the annual inflation rate to 4.9%. This sent the kiwi 0.2% higher vs the greenback to print a fresh cycle high through 0.71 the figure.

The data came in as the highest level since 2011's GST related spike and was well above both the market and Reserve Bank of New Zealand's forecasts. Inflation pressures are broad-based which traders will now anticipate a more aggressive resolve by the central bank, underpinning the downside in AUD/NZD and upside in NZD/USD for the foreseeable sessions ahead.

Consumers Price Index, September quarter 2021

Quarterly change: 2.2%
Market expected +1.5% (Range 1.2% to 1.8%).
Annual change:4.9%, RBNZ: 4.1%.

Analysts at Westpac released a note after the release and explained, ''inflation is being boosted by increasing supply-side pressures, including disruptions to global manufacturing and distribution, as well as increases in international oil prices. Those pressures have been reinforced by strong domestic demand, which has allowed many businesses to pass cost increases through to final prices.''

''Today’s result supports our forecast for a series of rate hikes from the RBNZ over the coming months.''

''Inflation is expected to remain above the RBNZ’s target band through much of the coming year as New Zealand continues to be buffeted by a perfect storm of inflation pressures. In large part that’s due to global supply disruptions and other supply-side pressures. Those pressures are likely to endure for some time yet, and could become even more pronounced over the coming months as we head into the holiday shopping season here and abroad.''

Meanwhile, analysts at ANZ Bank said, ''for the RBNZ, today’s data will only reinforce that hiking the OCR in early October was the right move.''

''Underlying inflation is too high, and further removal of monetary stimulus is needed to get things back on an even keel. With lockdown creating downside risks to employment and growth, uncomfortable trade-offs could quickly emerge. But with inflation this strong, the RBNZ won’t want to play fast and loose with their inflation-targeting credibility.''

NZD/USD spiked

The data lead to a spike in NZD/USD as follows:

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

EUR/USD edges lower below 1.1650 as Middle East tensions fuel US Dollar strength

The EUR/USD pair trades in negative territory around 1.1635 during the early Asian session on Thursday. The US Dollar strengthens against the Euro as escalating Middle East conflict boosts safe-haven flows. Traders brace for the Eurozone Retail Sales and US weekly Initial Jobless Claims reports, which will be released later on Thursday.

GBP/USD tests key moving averages as growth downgrade weighs

GBP/USD was nearly flat on Wednesday, edging up 0.08% to settle around 1.3370 in a quiet session. The pair has fallen sharply from its late-January high near 1.3870 and is now testing the 200-day Exponential Moving Average, with this week's one-week forex heatmap showing Pound Sterling as one of the worst performers against the US Dollar, down about 1.4% on the week.

Gold benefits from a retreating USD; reduced Fed rate cut bets cap gains

Gold attracts some buyers for the second consecutive day on Thursday amid a modest US Dollar pullback from an over three-month high, though it remains below the $5,200 mark. Wednesday's upbeat US macro data further tempered hopes for three rate cuts by the Fed in 2026. Furthermore, escalating Middle East tensions might continue to benefit the USD's status as the global reserve currency and contribute to capping the bullion.