AUD/USD and NZD/USD Fundamental Daily Forecast – NZD Rallies as Higher Inflation Reduces Chances of Rate Cut

According to Statistics New Zealand, headline consumer price inflation (CPI) jumped by 0.9% in the three months to September, the largest quarterly increase since the first three months of 2017.
James Hyerczyk
New Zealand Kiwi

The New Zealand Dollar is surging early Tuesday on the back of stronger-than-expected consumer inflation data. Today’s report showed New Zealand inflationary pressures surged in the September quarter, recording the largest percentage gain since early 2017.

According to Statistics New Zealand, headline consumer price inflation (CPI) jumped by 0.9% in the three months to September, the largest quarterly increase since the first three months of 2017.

The number beat financial market expectations of 0.7%. Furthermore, it was more than double the 0.4% gain forecast by the Reserve Bank of New Zealand (RBNZ). The big jump in quarterly CPI to 1.9% from a year earlier, represents the fastest increase since the September quarter of 2017.

At 0230 GMT, the NZD/USD is trading .6574, up 0.0021 or +0.30%.


The annual jump to 1.9% is well within the RBNZ inflation target of 1-3%, however, it is not likely to alter the central bank’s plans to keep its benchmark interest rate at current historically low levels.

Just a few weeks ago, a weaker-than-expected business confidence survey triggered a steep sell-off as investors began to price in the possibility of an interest rate cut. However, today’s solid inflation report likely reduces the odds of an RBNZ rate reduction.

The report from StatsNZ also said tradable inflation, or those influenced by offshore factors, rose at the fastest pace since the middle of 2015, primarily reflecting the impact of a weaker New Zealand Dollar and soaring fuel prices.

“On a quarterly basis, prices for tradables rose 0.9%, the highest quarterly increase since the June 2015 quarter,” it said. “Excluding vehicle fuels, the quarterly increase was only 0.3%.”

Fuel price surged 5.5% during the quarter, and 19% over the year. Even with the impact of soaring fuel prices, tradable prices grew by 0.8% from a year earlier.

Non-tradable prices, or those influenced by domestic factors, grew by a faster 2.6% over the year with higher prices for cigarettes and tobacco, construction, rents and local authority rates the largest contributor to the increase, according to StatsNZ.

Those price gains were partially offset by lower prices for education services following the introduction of one-year free provider-based tertiary education or industry training introduced in March.

Finally, while the headline increase in inflation was driven largely by one-of factors, the trimmed-mean measures released by StatsNZ that exclude extreme price movements grew by 1.8% to 1.9% from a year earlier, moving back towards the mid-point of the RBNZ’s inflation target.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.