Will CPI data stop the New Zealand Dollar rally

01/25/2023

1 minute read

2023.01.25 04:36

Budrigannews.com – On Tuesday, the New Zealand dollar traded just above the 0.65 level, showing a slight upward trend. is coming off an intense week that saw it rise 1.39 percent and reach highs not seen in seven months.

In what is expected to be a closely watched release later today, New Zealand releases for the fourth quarter. It is anticipated that quarterly inflation will be 1.3%, down from 2.2% in Q3. CPI is anticipated to decrease to 7.1% annually, down from 7.2% in Q3. The Reserve Bank of New Zealand, like other major central banks, has targeted inflation as the primary public enemy and increased interest rates by 325 basis points to the current rate of 4.25 percent.

The RBNZ doesn’t meet until Feb. 22, so it has time to process economic data before the meeting. The markets will be looking for clues regarding the magnitude of the increase as we get closer to the meeting, with 75 or 50 basis points being the most likely scenarios. After the first rate increase of the year, some central banks, like the Fed and the Bank of Canada, may suspend rate increases, but the RBNZ will not do so.

Is inflation at its peak? That crucial question is still a mystery. The government’s reduction in fuel taxes contributed to a decline in fuel prices in the fourth quarter; however, food costs remain high. The core rate, which is a more reliable indicator than the headline figure, will be closely monitored by the RBNZ.

The US PMI readings for December were slightly higher than anticipated, but this did not significantly raise the reading. increased from 46.2 in November to 46.8 in December. increased from 44.7 a month earlier to 46.6 (44.5 estimated). The most recent PMIs indicate weakness in both sectors, with a reading below 50.0 indicating contraction.