New Zealand Q1 Inflation Jumped, but Missed Estimates; NZD/USD Reacted Lower

  • NZDUSD
    (${instrument.percentChange}%)

NZD/USD Analysis

New Zealand Q1 CPI Inflation surged 6.9% year-over-year, from 5.9% prior, missing the 7.1% estimate. Despite that, this is the highest level in more than 30 years and it is higher than the 6.6% projection from the Reserve Bank of New Zealand back in February [1].

The RBNZ is far ahead than its major counterparts in monetary tightening, having delivered last week, its fourth consecutive and largest rate hike in twenty-two years [2]. It also pointed to more tightening ahead, while Governor Orr reaffirmed that on Tuesday's speech at the IMF's Spring meeting, saying that "We've also provided strong forward guidance that we expect to be doing more rate rises over coming quarters" [3].

The US Federal Reserve may have been late to the tightening party, but it has been acting fast and aggressively, with officials hinting towards potential 50 basis point hike in May, after the last month's lift-off. Market participants may have a chance to get more insight into the Fed's intentions, as Chair Powell is on tap today.

NZD/USD dropped after the CPI, since it missed estimates, pausing its two-day advance. Further pressure may lead to mid-0.6700s, but fresh catalyst would be needed for further decline that would threaten the with new April low (0.6714).

Despite the initial negative reaction, the pair finds support as sentiment seems in a good place and the US Dollar faces difficulties, defending the EMA100 (black line). as long as it defends this level, immediate bias is on the upside and we can see fresh highs towards the 38.2% Fibonacci of the April High/Low slide (0.6836). We are cautious however, for larger rebound that would challenge 0.6880-90.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 21 Apr 2022 https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Monetary policy statements/2022/mpsfeb22.pdf

2

Retrieved 21 Apr 2022 https://www.rbnz.govt.nz/news/2022/04/monetary-tightening-brought-forward

3

Retrieved 17 May 2022 https://www.imfconnect.org/content/imf/en/annual-meetings/calendar/open/2022/04/18/165186.html

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