NZ dollar dips after CPI unchanged

The New Zealand dollar is under pressure on Wednesday. In the European session, NZD/USD is trading at 0.6478, down 0.41%.

Markets eye New Zealand CPI

The New Zealand dollar reacted negatively to today’s CPI release, falling as much as 0.60% before paring these losses. Fourth-quarter CPI remained unchanged at 7.2%, a notch above the consensus of 7.1%. More importantly, the reading was below the Reserve Bank of New Zealand’s forecast of 7.5%, which could mean that the central bank will ease up on the pace of rate hikes.

The central bank has been aggressive, as it raised rates by some 325 basis points in 2022, bringing the cash rate to 4.25%. Similar to the Fed’s experience, the markets aren’t buying into the RBNZ’s hawkish message and are betting that rates will peak at 5.0%, lower than the RBNZ’s projection of 5.5%. The central bank delivered a supersize 75-basis point hike in November, and prior to the inflation release, the market had priced in a 75 bp or 50 bp hike as a 50/50 toss-up. Following the CPI reading, that has changed to 70/30 in favour of a 50-bp move. Inflation has been falling globally while domestically, consumer spending and confidence have fallen due to the rising cost of living. This has raised speculation that the RBNZ could wind up its current rate cycle earlier than it anticipated.

The US releases GDP for the fourth quarter on Thursday and we could see some volatility from the US dollar. GDP is expected to slow to 2.8%, down from 3.2% in Q3 but still a respectable pace of growth. On Wednesday, US PMIs pointed to contraction in the manufacturing and services sectors, pointing to cracks in the US economy as high rates continue to take their toll. The US dollar remains under pressure as soft readings have raised hopes that the Fed will ease up on rate policy due to the slowing economy.

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NZD/USD Technical

  • 0.6455 is under pressure in support.  The next support line is 0.6379
  • There is resistance at 0.6547 and 0.6648

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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