Risk aversion overshadows hot NZ Q4 CPI data: NZDUSD
In a reversal of roles, Australian Q4 CPI data released earlier this week has proved to be a reliable predictor of inflation in New Zealand, as annual inflation in New Zealand accelerated to a 30 year high earlier today.
Share this:
Headline consumer prices rose by 1.4% q/q, taking the annual inflation rate to 5.9%, up from 4.9% in the September quarter. As expected, Covid disruptions, strong commodity prices, and wider global inflation contributed to a significant lift in tradable (imported) inflation (+6.9%).
Elsewhere, gains in non-tradable or domestic inflation were especially strong driven by increases in construction prices, labour shortages, and transport costs.
Non-tradable inflation represents over half of all the items in the CPI basket. With little ability to influence tradables or imported inflation, the RBNZ will be aiming to slow down non-tradable inflation with rate hikes.
The RBNZ lifted the overnight cash rate twice in 2021 to 0.75%. As inflation is now almost twice the top of the RBNZ’s target band, there is little in the way to stop the RBNZ from lifting the overnight cash rate back to neutral at 2.5% by mid-2023.
Despite the higher inflation number and expectation of future RBNZ rate hikes, the NZDUSD has been taken hostage by this morning’s FOMC event, which has resulted in a solid bout of risk aversion across regional equity markets.
The chart below shows that the NZDUSD has broken below the multi-month trend channel support noted earlier in the week at .6660/50. While below here, there is scope for the decline to extend towards .6550 and then to .6500c in the medium term.
Source Tradingview. The figures stated areas of January 27th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
How to trade with City Index
You can trade with City Index by following these four easy steps:
- Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
Headline consumer prices rose by 1.4% q/q, taking the annual inflation rate to 5.9%, up from 4.9% in the September quarter. As expected, Covid disruptions, strong commodity prices, and wider global inflation contributed to a significant lift in tradable (imported) inflation (+6.9%).
Elsewhere, gains in non-tradable or domestic inflation were especially strong driven by increases in construction prices, labour shortages, and transport costs.
Non-tradable inflation represents over half of all the items in the CPI basket. With little ability to influence tradables or imported inflation, the RBNZ will be aiming to slow down non-tradable inflation with rate hikes.
The RBNZ lifted the overnight cash rate twice in 2021 to 0.75%. As inflation is now almost twice the top of the RBNZ’s target band, there is little in the way to stop the RBNZ from lifting the overnight cash rate back to neutral at 2.5% by mid-2023.
Despite the higher inflation number and expectation of future RBNZ rate hikes, the NZDUSD has been taken hostage by this morning’s FOMC event, which has resulted in a solid bout of risk aversion across regional equity markets.
The chart below shows that the NZDUSD has broken below the multi-month trend channel support noted earlier in the week at .6660/50. While below here, there is scope for the decline to extend towards .6550 and then to .6500c in the medium term.
Source Tradingview. The figures stated areas of January 27th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
The complete CFD trading experience
Award-winning platforms, competitive spreads, low commissions and dedicated support.
We live and breathe the markets and are dedicated to helping traders realise their ambitions as we continue to set the industry bar.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
USD/CAD forecast: rally could accelerate above June highs at 1.4250
USD/CAD recovered quickly after weaker US jobs data, keeping the bullish trend in focus. A move above the June highs could accelerate the rally as inflation keeps the Fed under pressure.
USD Sets Fresh Yearly High as EUR/USD Drops Dramatically, USD/JPY Stable
Well, it was a week of USD strength that wasn’t entirely pushed by USD/JPY, as a strong sell-off in EUR/USD has pushed the major pair to its most oversold state in a decade.
USD/CAD shooting star puts September surge on notice
USD/CAD has printed a clear bearish reversal pattern after an extraordinary September surge, but confirmation may depend heavily on how US Treasury yields react to Friday’s payrolls report.
StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation.
StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.