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NEW ZEALAND: NZDUSD Pulls Back Towards 0.5600, Q4 CPI Awaited

NEW ZEALAND
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  • The New Zealand dollar was the best performing G10 currency on Monday, fuelled by the less imminent timeline for US tariff implementation and the associated optimism for risk sentiment. This allowed NZDUSD to extend its recovery from last week’s lows to 2.65%. However, bearish technical conditions still remain in place and today’s reversal underscores this theme.
  • The significant volatility comes ahead of Q4 inflation data, which includes the RBNZ’s estimates of core CPI, scheduled for release later today at 2145 GMT. Bloomberg consensus forecasts for headline inflation are in line with the RBNZ’s November projections at 2.1% y/y. The expected quarterly increase of 0.5% is slightly higher than the RBNZ’s 0.4%.
  • Domestically-driven non-tradeables inflation will be watched closely. It is forecast to rise 0.8% q/q and 4.7% y/y down from 1.3% q/q & 4.9% in Q3. Consensus is in line with the RBNZ.
  • Following the sharp contraction in Q3 and Q4 growth, another 50bp rate cut from the RBNZ on February 19 is likely, especially if inflation prints around the band’s mid-point.
  • For NZDUSD, 50-day EMA resistance remains untested, intersecting today at 0.5729. Key multi-year supports reside at 0.5512 (2022 low) and 0.5470, the low seen shortly after the onset of the covid pandemic in early 2020.
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  • The New Zealand dollar was the best performing G10 currency on Monday, fuelled by the less imminent timeline for US tariff implementation and the associated optimism for risk sentiment. This allowed NZDUSD to extend its recovery from last week’s lows to 2.65%. However, bearish technical conditions still remain in place and today’s reversal underscores this theme.
  • The significant volatility comes ahead of Q4 inflation data, which includes the RBNZ’s estimates of core CPI, scheduled for release later today at 2145 GMT. Bloomberg consensus forecasts for headline inflation are in line with the RBNZ’s November projections at 2.1% y/y. The expected quarterly increase of 0.5% is slightly higher than the RBNZ’s 0.4%.
  • Domestically-driven non-tradeables inflation will be watched closely. It is forecast to rise 0.8% q/q and 4.7% y/y down from 1.3% q/q & 4.9% in Q3. Consensus is in line with the RBNZ.
  • Following the sharp contraction in Q3 and Q4 growth, another 50bp rate cut from the RBNZ on February 19 is likely, especially if inflation prints around the band’s mid-point.
  • For NZDUSD, 50-day EMA resistance remains untested, intersecting today at 0.5729. Key multi-year supports reside at 0.5512 (2022 low) and 0.5470, the low seen shortly after the onset of the covid pandemic in early 2020.