New Zealand dollar shrugs as inflation expectations rise

  • New Zealand inflation expectations rise to 2.83%
  • China’s inflation decreases for the first time since February 2021

The New Zealand dollar is showing limited movement on Wednesday, trading at 0.6060 in the European session.

New Zealand inflation expectations nudge higher to 2.83%

Like most major central banks, the Reserve Bank of New Zealand has been waging a long and tough battle against inflation by raising interest rates. CPI fell to 6.0% in the second quarter, down from 6.7%. That’s certainly good news, but let’s remember that inflation is still rising sharply and is much higher than the RBNZ’s 2% target.

The central bank is also concerned about inflation expectations, which can become embedded when inflation is high and translate into even higher inflation. Wednesday’s 2-year inflation expectations release showed a rise to 2.83% in the third quarter, up from 2.79% in the second quarter. One-year inflation expectations fell to 4.17% in Q3, down from 4.17% in Q2.

The data indicates that inflation expectations remain high, and that perception could make the life of policy makers more difficult in the fight to bring down inflation. The RBNZ has a long way to go before inflation falls to the 2% target, and that will likely mean further rate hikes unless inflation levels fall sharply. The RBNZ held rates at 5 .50% in July and meets next on August 16th.

China’s CPI indicates deflation

China is experiencing a bumpy recovery, and that is bad news for the global economy. Commodity currencies such as the New Zealand dollar are sensitive to Chinese economic releases and a soft Chinese trade release on Tuesday sent NZD/USD lower by as much as 80 basis points. The bad news continued on Wednesday as China’s CPI for July declined by 0.3% y/y, down from 0.0% in June and just above the consensus estimate of -0.4%. This marked the first decrease in CPI since February 2021 and points to weakness in the Chinese economy, which will likely mean less demand for New Zealand exports, a negative scenario for the New Zealand dollar.


NZD/USD Technical

  • NZD/USD continues to put pressure on support at 0.6031. Below, there is support at 0.5964
  • 0.6129 and 0.6196 are the next resistance lines

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

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, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

Latest posts by Kenny Fisher (see all)