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NZD Tumbles on Weak Inflation

Published April 18, 2019

Big day for the NZD yesterday, as Q1 2019 and YOY inflation numbers missed expectations. Q1 actual 0.1% (against 0.3 % expected) and YOY 1.5% (against 1.7% expected). The NZD lost nearly a cent immediately on the news dipping below .6700 briefly before bouncing back a little and spending the rest of the day trading between .6700 and .6745. We open this morning at .6722 and given the long weekend ahead of us expect the currency to range trade today. Yesterday’s data supports the RBNZ’s dovish interest rate outlook going forward and a view that their next move on interest rates will be another cut.

The major cross rates have all been impacted by the downside shift in the Kiwi, providing exporters with their best opportunity since January this year to get some cover on board.

AUD has spiked vs the USD overnight on some better than forecast numbers out of China. Q1 GDP March industrial production and March retail sales all beating expectations, providing a lift in the AUDUSD further compounding the problem on NZDAUD cross for New Zealand importers.
US also had a raft a data releases overnight, with the most important being month on month trade balance deficit which also beat (came in under) the markets expectations, so all in all the NZD did and will continue to have problems making any immediate positive headway for Kiwi importers.

GBPUSD flat on the overnight market. UK inflation rate held steady at 1.9% (v 2% expected number).
EURUSD, a little higher on the session with Eurozone CPI and core CPI coming in at 1.4% and 0.8% respectively, and both meeting market forecasts.

Happy Easter!