Kiwi Outperforms Amid Inflation Surge

Although a surge in New Zealand's CPI inflation reported in Monday's Asia-Pac hours pushed NZD/USD higher, subsequent demand for the greenback inspired the pair to reverse its initial gains into the London open. NZD/USD managed to regain poise later in the day as greenback strength eased somewhat, with the kiwi returning to the top of the G10 scoreboard. The rate extended its winning streak to four days in a row and tested a key resistance area.

• Bulls continue to look for a clearance of that zone at $0.7101, which represents the confluence of the 200-DMA and a descending trendline drawn off Feb 2021 high. The next layer of resistance above is provided by Sep 3 high of $0.7170. Conversely, bears would be pleased by a pullback under Oct 14 low of $0.6956. The rate sits at $0.7088 as we type.
• The surge in inflation sent NZ breakeven rates soaring and boosted RBNZ tightening wagers. The OIS strip now prices 38bp worth of OCR hikes at the Reserve Bank's next monetary policy meeting, amid a pressing need to tame inflation, implying 50:50 odds of a double-barrel 50bp increase in the OCR.
• Thursday's credit card spending provides the highlight of the local data docket during the remainder of this week.
• Elsewhere, PM Ardern told the AM Show that the government was working to reopen Auckland by Christmas.