New Zealand Dollar Rallies as CPI Data Reduces RBNZ Rate Cut Bets -

    Talking Points

    • The New Zealand Dollar rallied against its major peers - NZD/USD climbed nearly 0.7 percent
    • New Zealand CPI rose 0.2% y/y and 0.2% q/q in the 3Q versus 0.1% and 0.0% expected respectively
    • Better than expected data likely lowered near-term RBNZ rate cut bets as 2-year bond yields rose

    Having trouble trading the New Zealand Dollar ? This may be why .

    The New Zealand Dollar gained against its major counterparts after the third quarter (3Q) New Zealand consumer price index statistics crossed the wires. CPI clocked in at 0.2% on a quarter-over-quarter basis (QoQ) and 0.2% on a year-over-year pace (YoY) versus 0.0% and 0.1% expected. While the data was better than expected, the readings showed slight deflation from the second quarter data which was 0.4% for both periods respectively.

    Furthermore, in a historical context, the pace of consumer inflation remains at remarkably depressed levels. The current, general levels of price pressures are near the lowest since the late 1990s. For context, the c entral bank targets a range of 1 .0 to 3.0 percent; which goes a long way to explain why the benchmark lending rate for New Zealand currently stands at a record low.

    In their most recent interest rate decision, the Reserve Bank of New Zealand (RBNZ) held rates but stoked speculation that further easing was on the horizon . Since that monetary policy announcement, the markets implied probability of the central bank cutting rates by another 25 basis points in November climbed from 0% to 82%.

    With low inflation concerns holding the spotlight for RBNZ's policy direction, today's data likely reduced some of the built up easing speculation. Indeed, New Zealand 2-year government bond yields rallied alongside the local currency after the CPI data was released.

    Keep an eye on short-term trends for New Zealand Dollar crosses using the Grid Sight Index (GSI) here .

    New Zealand Dollar Rallies as CPI Data Reduces RBNZ Rate Cut Bets

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