Home Daily Commentaries Kiwi outperforms following monster CPI print

Kiwi outperforms following monster CPI print

Daily Currency Update

The New Zealand dollar edged marginally lower through trade on Monday, giving up an early break above 0.71, yet holding onto gains above 0.7050 Us cents. The NZD bounced through 0.71 to mark intraday highs at 0.7105 after a robust jump in domestic inflation data. The CPI print wrote in a 4.9% increase across, far exceeding market expectations and further evidence monetary policy remains far to accommodative. The uptick in inflation pressure prompted investors to price in additional RBNZ rate hikes with the likelihood of the OCR moving back above 2% by the end of 2022 now priced in. The NZD was, however, unable to hold onto gains and drifted back toward the morning open through the rest of the domestic session. Having found support at 0.7050 the NZD crept higher overnight, buoyed by a broadly weaker US dollar.

Our attentions today turn to commentary from PM Ardern. We expect the Auckland restrictions will remain at level 3 until vaccination targets are reached. New Zealand’s slow vaccine take up means strict lockdown laws will likely remain in place for some time, crimping Q4 GDP estimates and weighing on the broader NZ economic recovery.

Key Movers

The US dollar fell through trade on Monday, marking a fourth consecutive daily depreciation as the Euro found momentum and the Pound failed to build on Friday’s gains. Domestic macroeconomic data was mixed on Monday with industrial production falling thanks to the impacts of Hurricane Ida while confidence among the housing sector continues to improve. The Euro pushed back through 1.16 touching intraday highs at 1.1620 while the GBP fell back below 1.3750. Markets continue to bring forward estimates for a UK rate hike, with most now anticipating policy makers will raise rates as early as next month in an attempt to avoid rising inflationary pressures. With the UK economic recovery so fragile there is a real fear early monetary policy adjustment and a tightening of interest rates will only derail any post delta rebound and have little impact on controlling supply driven price increases. If we learnt nothing from the 1970’s stagflation crisis raising interest rates alone does little to control inflation. We are keenly attuned to any BoE rhetoric that hints as to what the MPC will do in November. Our attentions today turn to yearly UK CPI data as a key metric driving direction while commentary from key FOMC policy makers could provide further forward guidance ahead of the Fed policy meeting next month.

Expected Ranges

  • NZD/USD: 0.7020 - 0.7120 ▲
  • NZD/EUR: 0.6030 - 0.6130 ▼
  • GBP/NZD: 1.9290 - 1.9530 ▼
  • NZD/AUD: 0.9480 - 0.9620 ▲
  • NZD/CAD: 0.8690 - 0.8810 ▲