New Zealand's third quarter inflation figures were almost in line with expectations: the year-on-year rate fell as expected to 2.2%, while quarter-on-quarter inflation rose slightly less than expected to 0.6%. The data do not really allow for a fundamental reassessment, Commerzbank’s FX analyst Michael Pfister notes.
NZD/USD is well off its early October highs
“In fact, there is still a strong case for the Reserve Bank of New Zealand to continue to ease the restrictiveness of monetary policy at upcoming meetings. After all, New Zealand's real economy continues to falter and the sharp decline in the annual rate should provide arguments for a further 50bp cut next month.”
“The Kiwi came under pressure after the figures were released, only to recover somewhat in early Asian trading. NZD/USD is now well off its early October highs. While last week's 50bp rate cut may have played a role, as it boosted New Zealand's expectations for the November meeting, continued weakness in Chinese data may also have played a role.”
“With inflation, one of New Zealand's most important data points, now behind us, attention should return to Chinese data. If they continue to weaken, the Kiwi's recovery is likely to be delayed.”
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