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NZD Rides Risk Rebound, All Eyes On Q3 CPI Today


NZD/USD is up 1.30% since the start of the week, amid broad USD weakness, although is around middle of the pack from a G10 standpoint. The pair currently sits around 0.5630, just shy of overnight highs close to 0.5650. We haven't spent much time above 0.5670/80 going back to October 7th, so this could in focus if we see further upside momentum today. The domestic focus will be on the Q3 CPI print, out in around 45mins.

  • The market expects a moderation in headline inflation pressures, 1.5% q/q forecast versus 1.7% previously, which would bring the y/y pace down to 6.5%, from 7.3% in Q2. This owes largely to lower fuel prices.
  • Still, non-tradable inflation is expected to have picked up to 1.8% q/q in Q3, from 1.4% in Q2, outpacing tradables inflation (1.2% q/q forecast, versus 1.9% prior). Stronger underlying domestic price pressures is expected to keep the RBNZ backdrop still fairly hawkish.
  • The RBNZ's terminal rate pricing by the market remains around 5.00%. NZ-US 2yr government bond yield spreads remain below 0bps, but is up from recent lows around -20/-30bps.
  • Elsewhere, the set up for risk sentiment looks to be positive for Asia Pac markets today, following strong gains overnight (SPX +2.65%, VIX to 31.40%). Lower core yields, led by the UK, was a key driver of sentiment.

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