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Talking Points:

  • The NZD is jumping as Kiwi bulls speculate over a potential shift in Reserve Bank of New Zealand policy from dove to hawk
  • New Zealand inflation has firmed up recently with the CPI gauge in line with the central bank’s 1-3 percent target range for the last 9 quarters

Statistics New Zealand just released the country’s latest CPI reading, which came in at 1.9 percent, or 0.1 percent higher than expected. The news sent the New Zealand Dollar soaring against the USD as firming inflation may lead the Reserve Bank of New Zealand to shift from a neutral stance to a potentially hawkish one.

NZDUSD INDEX PRICE CHART: 5-MINUTE TIME FRAME (JANUARY 22, 2019 INTRADAY) (CHART 1)

NZDUSD Currency Price Chart January 22, 2019 after Inflation Data

The country has reported CPI data above consensus for the second consecutive quarter, with the indicator following a solid upward revision to GDP numbers released last month. Although the RBNZ is viewed as a relatively dovish central bank, there is a growing case for New Zealand monetary policy setters to tip the needle towards tightening. In turn, tighter monetary policy pushes up interest rates and thus makes the domestic currency more attractive relative to other currencies.

NEW ZEALAND ANNUAL INFLATION RATE PRICE CHART: QUARTERLY TIME FRAME (JANUARY 15, 2018 TO JANUARY 15, 2019) (CHART 2)

NZD Spikes After Inflation Reported Higher Than Expected

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Written by Rich Dvorak, Junior Analyst for DailyFX

Follow on Twitter @RichDvorakFX

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