NZD rises, Inflation Expectations looms

The New Zealand dollar ended the week with gains and continues to move higher on Monday. Currently, NZD/USD is trading at 0.7216, up 0.28% on the day.

New Zealand Inflation Expectations next

The New Zealand economy has rebounded impressively since the dark days of Covid in 2020, when the country experienced a recession. The economy is currently firing on all cylinders, and this has led to Inflation Expectations slowly moving higher, with a read of 1.53% in Q4 of 2020. This indicator is closely watched because inflation expectations can translate into actual inflation. If the indicator continues to accelerate, the New Zealand dollar could respond with gains.

New Zealand posted excellent employment numbers last week, in particular the unemployment rate which dropped sharply and defied the forecasts. Interestingly, the New Zealand dollar did not respond to the strong job data with gains. Still, there has been a significant shift in market perception of future interest rate policy. It wasn’t all that long ago when there was speculation that New Zealand might follow the lead of the ECB and Swiss National Bank and introduce negative interest rates. However, with the economy rebounding so quickly, analysts are now projecting a rate hike in 2023.

Are the markets correct in their perception that the RBNZ is changing its monetary policy stance? We’ll hear from the RBNZ itself at the next policy meeting on February 24, an event that is sure to be closely watched. If the central bank hints at a rate hike, the New Zealand dollar could get a significant boost. At the same time, NZD/USD has surged in recent months, and the central bank does not want this upward trend to continue.

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NZD/USD Technical

  • 0.7240 is under pressure in resistance. Close by, there is resistance at 0.7277
  • There is support at 0.7150. Below, we find support at 0.7097
  • The 50-day moving average (MA) remains relevant, at 0.7141

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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