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April 23, 2019
The New Zealand Dollar strengthened around 0.35 percent in today's NZD / USD pair, but the rebound is expected to be only temporary. The New Zealand Dollar strengthened around 0.35 percent to around 0.6648 against the US Dollar at the beginning of the European session, after the release of the New Zealand trade balance that exceeded expectations.
The AUD / NZD currency pair also weakened around 0.13 percent to 1.0573. However, analysts predict that the Kiwi rebound this time is only temporary. Earlier this week, the Kiwi had fallen following the release of Australian inflation data which was far worse than initial expectations. As time went on, the pressure began to decrease.
Meanwhile, the New Zealand trade balance reported a surplus of 922 million (Month-over-Month) in March, outperforming expectations that were pegged at 131 million. McIntyre considers that Kiwi is only "breathing" now. He estimates that the NZD / USD will not rise much higher. "(New Zealand Dollar) will encounter obstacles between current levels and 67 US cents," he said.
It should be noted, New Zealand inflation data for the quarter I / 2019 has been reported to miss expectations. That increased the probability of cutting interest rates by the central bank in May. On the other hand, the US Dollar tends to be sideways in trading today, because it looks forward to the release of the United States Gross Domestic Product (GDP) data later.
However, the rally since the beginning of the week has pushed the US Dollar index (DXY) close to a two-year high. Market participants expect the GDP rate to firmly outperform other countries of major currencies with an annual increase of 2.2 percent.
NZD / USD bearish bias strengthened as a decline in the annual CPI rate affected the projection of the New Zealand interest rate policy. The New Zealand Consumer Price Index (CPI) missed expectations, triggering the NZD / USD to fall more than 1 percent to the range of 0.6665, the lowest level since early January.
When the news is written ahead of the European session opening, NZD / USD has bounced back to around 0.6742 thanks to the release of better Chinese GDP data. However, the Kiwi bearish bias strengthened due to a decline in the CPI affecting the projection of the New Zealand interest rate policy.
The New Zealand CPI report for I / 2019 quarter showed an increase of only 0.1 percent (Quarter-over-Quarter), far lower than expectations of 0.3 percent. The sluggish quarterly inflation dragged down the annual inflation rate from 1.9 percent to 1.5 percent (Year-on-Year). In fact, market participants initially expected annual inflation to reach 1.7 percent.
The inflation rate is also lower than the estimation of the Reserve Bank of New Zealand / RBNZ. In its policy meeting last month, the RBNZ said that they expect inflation to rise 1.6 percent in the first quarter. This gap between estimates and actual data results in direct investors and traders worrying about the probability of cutting the RBNZ (Official Cash Rate / OCR) in the near future. "The start of inflation (this year) is low and we believe the weaker New Zealand economic outlook is likely to dampen the medium-term inflation rate," said Nick Tuffley, chief economist at ASB Bank, as quoted by Bloomberg.
The NZD / USD currency pair collapsed after the release of the data, due to the large number of market participants who recalculated the probability of cutting the RBNZ interest rate. Moments later, his position rose again because it was boosted by optimism carried by China's GDP data. However, despite the improved external situation, experts are still concerned about the outlook for the domestic economy this year.
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