When is NZ CPI and how might it affect NZD/USD?

New Zealand CPI overview

At 21.45 GMT, New Zealand Q4 CPI data is due and it could be a major catalyst in early Asia today following a turbulent risk-off market in North American trade.  

Analysts at Westpac expect the data to show a near-flat reading for the quarter but with underlying inflation resilient:

"Westpac looks for 0.1%qtr (median 0.0%), which would keep the annual rate at 1.9%. A slide in vegetable prices should play a key role in dampening Q4 inflation (limited impact from fuel) but this comes after a steep 0.9%qtr rise in Q3. If we are correct that core inflation will tick up to 1.6%yr, then the RBNZ will not be concerned by the weak headline reading."

Analysts at ANZ Bank also expect headline CPI to be flat in Q4 (RBNZ: +0.2%), with annual inflation slipping from 1.9% to 1.8%.

"The headline is set to be dragged down by lower oil and food prices; we’re picking a -0.7% print for tradables inflation, with downside risk. Non-tradables inflation is the more important component; we’re picking +0.4% in line with the RBNZ’s pick, but housing components provide upside risks. While the market is poised to respond to a surprise in either direction, the data reflects where the economy has been. The medium-term outlook for domestic inflation is more troubling. The RBNZ needs to see accelerating GDP growth to achieve a sustained lift in inflation, and the prospect of that is slipping away."

How could the data affect NZD/USD

Global trade tensions are at the core of the market's theme on Tuesday's session in overnight trade which is morphing into a risk-off start in early Asia today, to the detriment to high beta and commodity-FX.  However, as for the antipodes, the Aussie has taken the brunt of it, so far. AUD/NZD is sliding towards hourly S2 and NZD/USD is robust, sitting just shy of where it was 24 hours ago while the greenback loses its appeal as well. "A negative or a widely-expected zero print could weigh, with markets increasingly expecting a more dovish RBNZ tone in February. In our view, the mix of inflation will matter; watch the non-tradable component," analysts at ANZ Bank argued. The downside targets for NZD/USD are located at 0.6650 on a break of the 0.6706 fractal swing low. Key resistance is located at 0.6860.

Key notes:

• NZ: CPI likely to print 1.8%/y - TDS
• NZ: Recent volatility in fuel prices to have little bearing on Q4 CPI – 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.