The upcoming New Zealand quarterly CPI launch is commonly a powerful catalyst for Kiwi volatility.
Will the most recent learn present sticky inflation circumstances and immediate hypothesis of a extra hawkish RBNZ stance forward?
Make amends for the occasion earlier than planning out your worth technique and danger administration strikes!
Occasion in Focus:
New Zealand Shopper Value Index (CPI) and inflation information for Q3 2023
When Will it Be Launched:
October 17, 2023 (Tuesday), 9:45 pm GMT
Use our Foreign exchange Market Hours software to transform GMT to your native time zone.
Expectations:
Shopper Inflation Price q/q: +1.9% forecast vs. +1.1% earlier
Shopper Inflation Price y/y: +5.8% forecast vs. +6.0% earlier
forecast as of October 15, 2023, 5:00 pm GMT
Related Information Since Final Occasion/Information Launch:
Meals worth index jumped by 8.9% y/y in August, 9.6% y/y in July
ANZ commodity costs up 1.3% m/m in September, down by -2.9% m/m in August, -2.6% m/m in July
New Zealand Manufacturing Index for September fell to 45.3 vs. 46.1
Producer output costs for Q2 was 0.2% q/q (0.2% q/q earlier); Enter costs have been -0.2% q/q vs. 0.0% q/q earlier
NZIER’s Quarterly Companies of Enterprise Opinion for Q3: “Pricing pressures have eased whereas value pressures stay intense”
New Zealand quarterly inflation expectations ticked increased from 2.79% to 2.83% q/q, suggesting a possible pickup in worth pressures over the subsequent two years ticked increased from 2.79% to 2.83% q/q, suggesting a possible pickup in worth pressures over the subsequent two years
Earlier Releases and Threat Surroundings Affect on NZD
July 18, 2023
Overlay of NZD vs. Main Currencies Chart by TradingView
Occasion outcomes / Value Motion:
Again in July, New Zealand reported that shopper inflation was up by 1.1% q/q in Q2 2023 vs. 1.2% in Q1, 0.9% anticipated. This sparked a fast pump increased within the Kiwi towards the majors currencies, which was finally taken as one other shorting alternative within the intraweek worth downtrend and risk-off setting.
Threat setting and intermarket behaviors:
Escalating tensions in Ukraine and arguably internet destructive financial information from the foremost economies bought merchants pricing in increased rates of interest and rising recession chances.
This theme carried weight via the entire week, prompting capital to circulate to protected haven currencies just like the Dollar and Swiss franc.
April 19, 2023
Occasion outcomes / Value Motion:
New Zealand’s Q1 CPI slumped from 1.4% to 1.2% quarter-over-quarter versus the projected improve to 1.5%, dampening RBNZ tightening hopes as power costs tumbled.
Previous to this, the RBA and BOC already paused their rate of interest hikes, main Kiwi merchants to cost in an analogous determination from the RBNZ now that inflationary pressures slowing.
The Kiwi, which examined its intraweek highs forward of the CPI launch on Wednesday, rapidly reversed the rallies upon seeing the precise numbers and wound up because the second weakest main foreign money for the week.
Threat setting and intermarket behaviors:
The highlight was on inflation and financial coverage biases all through the week, as CPI and jobs figures from main economies have been on the docket.
Though most CPI releases pointed to slowing worth pressures, upbeat employment information and a handful of PMIs hinted at a protracted interval of upper borrowing prices, spurring risk-off flows on recession fears.
With that, safe-haven property and lower-yielding currencies have been on stronger footing whereas riskier bets simply gave up floor.
Value motion chances:
Threat sentiment chances:
Geopolitical influences are prone to proceed to have weight this week because the Israel-Hamas struggle continues to develop and extra casualties are anticipated.
But it surely should take care of a foreign exchange calendar for merchants’ consideration, particularly given the slew of prime tier occasions together with inflation updates from numerous main economies, an enormous spherical of financial updates from China, and central financial institution commentary, particularly from the Federal Reserve.
International financial indicators are anticipated to doubtless sign a slowing progress and sticky inflation setting, which can doubtlessly affect merchants to lean danger averse this week. On the identical time, these identical alerts doubtless assist each a peak within the charge hike cycle however a “increased for longer” expectations for charges. This may occasionally immediate some to decrease their recession expectations bets.
All put collectively, particularly with geopolitical dangers in play, this will likely proceed to immediate merchants to lean risk-off this week, however anticipating this week’s danger setting outlook might be a really difficult endeavor because of the regular stream of financial updates and a wildly dynamic geopolitical setting.
An excellent follow for a lot of in that state of affairs would prone to be in reactionary mode and alter danger administration plans accordingly.
New Zealand greenback situations:
Potential Base State of affairs:
Based mostly on the previous two releases, the response to the NZ CPI occasion has been a powerful directional transfer within the Kiwi, however broad danger setting was an element as effectively. Within the July launch, broad danger sentiment rapidly drew merchants’ consideration after a higher-than-expected NZ CPI (however under earlier) learn.
If expectations of a powerful charge in worth rises materializes and a broad danger aversion setting stays across the occasion we might even see comparable conduct to July’s launch. An occasion rally would be the preliminary response however broad danger aversion vibes might attract Kiwi sellers on the bounce.
One different factor to notice is that Kiwi bears got here out sturdy final week. The bearish vibes are sturdy and recent, so a notable bounce within the inflation charge might not stir a major bullish response, particularly if broad risk-off catalysts are working and we don’t see an upside shock in CPI relative to each expectations and former reads.
Potential Different State of affairs:
A under expectations / earlier quarterly NZ CPI learn is at present not anticipated and would doubtless attract sellers from the basic aspect of the dealer spectrum, which can additionally doubtless result in technical momentum sellers coming into play as effectively.
On this state of affairs, the Kiwi might even see intraweek momentum strikes (much like the April launch) as merchants worth in the concept that financial circumstances could also be slowing in New Zealand and that the Reserve Financial institution of New Zealand has room to be much less hawkish at their subsequent financial coverage assembly.
Be careful for high quality brief NZD technical setups on the charts earlier than contemplating a danger administration plan, particularly towards “protected haven” currencies if geopolitical sentiment continues to be strongly influencing monetary market conduct negatively this week.
This content material is strictly for informational functions solely and doesn’t represent as funding recommendation. Buying and selling any monetary market entails danger. Please learn our Threat Disclosure to be sure to perceive the dangers concerned.
