New Zealand CPI overview
The CPI data today 22.45GMT is keenly awaited and forecasted to come in on the softer side of the RBNZ’s expectations. Analysts at Westpac are forecasting a subdued 0.1% rise in the CPI for the June quarter, which would see annual inflation recede from 2.2% to 1.8%. New Zealand’s inflation figures are often thrown around by temporary factors and this year has been no different. There was an unusually large 1% rise in prices over the March quarter, which was led by gains in food and fuel prices. Food and fuel will continue to play an important role in the June quarter figures, though this time their net impact on the inflation rate will be negative. Our forecast is lower than the 0.3% quarterly increase that the Reserve Bank forecast in its May Monetary Policy Statement."
How could CPI affect NZD/USD?
NZD/USD has been trading in a narrow summer holiday range but lost some ground overnight. A downside surprise on inflation is unlikely to be too much of a concern for the Reserve Bank, and thus the bird is unlikely to lose too much traction where otherwise the greenback is struggling in an environment where markets are losing faith in the Fed's outlook for the US economy and their projections for rate hikes. The 0.7300 level is a key psychological support with 14th July lows located at 0.7299. Should the result surprise to the upside and beat market expectations of 1.9% and surpass 2.2% prior reading y/y, 0.7368 is the first key target.
Key notes:
NZD/USD: Potential to match the 2016 high of 0.7485 - Westpac
About NZ CPI
Consumer Price Index released by the Statistics New Zealand is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services . The purchase power of NZD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. A high reading is seen as positive (or bullish) for the NZD, while a low reading is seen as negative.
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