New Zealand dollar hits 1-month low
The New Zealand dollar has dropped considerably in the Tuesday session. NZD/USD is currently trading at 0.6995, down 0.72% on the day.
New Zealand will release Inflation Expectations on Thursday. The indicator has been accelerating and rose to 2.27% in the second quarter. The RBNZ will be paying close attention, as inflation expectations can manifest into actual inflation, and inflation levels will be an important consideration for the RBNZ in deciding whether to raise rates for a second straight month at next week’s policy meeting. In October, annual inflation for Q3 jumped to 4.9%, up from 3.3% and above the consensus of 4.2%. The central bank was one of the first major central banks to tighten policy when it raised rates last month, and the RBNZ is widely expected to make a series of rate hikes into 2022.
In the US, inflation has hit its highest level in 30 years, and the markets are watching to see if the Fed will take some action to contain inflation. The Fed announced earlier this month that it would taper its bond program, but the voices calling for a faster reduction are getting louder. Former New York Fed President Bill Dudley, former US Treasury Secretary Lawrence Summers and other officials are urging the Fed to speed up tapering. The Fed will in all likelihood address this issue at its December meeting, and will see the October PCE index, its preferred inflation gauge, as well as the November CPI report ahead of the meeting. The argument against accelerating tapering is the fear that it could trigger a taper tantrum, which occurred back in 2013 and caused a spike in US Treasury yields.
- There is resistance at 0.7146 and 0.7252
- NZD/USD has support at 0.6966. Below, there is support at 0.6892
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