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NZD Higher on Inflation Data

Published October 17, 2018

The Kiwi Dollar opens higher once again, holding on to gains made yesterday after higher than expected CPI data. The NZD was the best performer of major currencies overnight and we see all cross rates higher this morning, notably the NZD/JPY up by 1%, and the NZD/AUD finally climbing out of its recent range and hitting its highest level since June. Improved risk sentiment for emerging market currencies was also a positive for the NZD, while another fall in Global Dairy Prices overnight had little impact on the currency. There is little in the way of local data today, with market attention turning to tomorrow mornings release of US FOMC Meeting Minutes for September.

NZ Inflation Above Expectations

The NZ Q3 inflation report showed consumer prices increased by 0.9% for the quarter, compared with 0.4% in Q2, and against market expectations of a 0.7% increase. This has seen annual inflation climb to 1.9%, vs market expectations of 1.7%. The annual rate is also just below the RBNZ mid-range target of 2.0%. The higher than expected numbers saw the Kiwi gain half a cent as it increases the likelihood of the RBNZ adjusting its forecasts ahead of the November Monetary Policy Statement.

No Surprises from RBA

Minutes of the RBA October 2nd meeting showed they expect the weak Australian dollar to support domestic economic growth. They indicated that the next move in official interest rates is more likely to be an increase than a decrease, although they do not see a near-term change. Next major announcement for the AUD is tomorrows employment numbers for September. The Aussie was up slightly yesterday, but unable to keep pace with the Kiwi, sending the NZD/AUD cross rate above 92 cents, its highest level since June.

GBP Higher on More Mixed Brexit News

The Pound ticked higher overnight as the mixed Brexit messages from EU and UK officials continued. This time it was comments from EU’s chief negotiator Michael Barnier, who said the European Union and Britain will work “calmly and seriously” in the next weeks to reach a deal on Britain’s withdrawal from the bloc without creating a hard border between Ireland and Northern Ireland.