The New Zealand dollar moved higher earlier in the day but has since surrendered these gains. NZD/USD is currently trading at 0.7114 down 0.06% on the day.
New Zealand GDP ahead
New Zealand releases GDP for the second quarter on Wednesday, and the kiwi could have a banner day. The consensus stands at a whopping 16.3% gain (YoY). Granted, the consensus is significantly inflated since it is in comparison with Q2 of 2020, when Covid-19 was at its height. Still, a double-digit gain would point to strong economic activity and investors would likely give a thumbs-up to the New Zealand dollar. The New Zealand dollar has barreled higher, with gains of 1.1o% in August and 0.97% in September. The RBNZ has been forced to delay plans to hike interest rates, but a strong GDP report is sure to fuel speculation of a rate hike in the coming months. There’s little doubt that RBNZ policymakers are itching to raise rates – after the August policy meeting, Assistant Governor Christian Hawkesby stated that “a 50 basis point move was definitely on the table”.
US CPI slows, a bit
Inflation has become closely watched, after years of low inflation which hardly garnered a comment. The recent spike in inflation levels, which has been fueled by the reopening of economies and the easing of Covid restrictions, could have a crucial impact on the Federal Reserve’s monetary policy. The Fed has insisted that inflation will cool down, but the markets have become more sceptical with each passing month that inflation moves higher.
The August CPI data may, however, support the Fed’s stance. Headline CPI registered a 0.3% gain (MoM), down from 0.5% in July. On an annualized basis, CPI gained 5.3%, down slightly from 5.4% in July. Core CPI dipped to 0.1% (MoM), down from 0.3% in July. Core CPI (YoY) rose 4.0%, down from 4.3% beforehand. This does not mark a huge slowdown by any means, but may signal that inflation has finally been brought under control. If so, there will be less pressure on the Fed to taper, which could weigh on the US dollar.
- There is resistance at 0.7159 and 0.7202
- On the downside, there is support at 0.7074. Close by, there is support at 0.7032
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