Today’s Chart: NZDUSD (12/07/2023)

Today’s trading session is likely to be key for the week due to the expected release of CPI data from the US, the Bank of Canada’s interest rate decision and the reaction to the RBNZ’s decision this morning.

The Reserve Bank of New Zealand left interest rates unchanged at 5.5%, in line with general expectations. However, the RBNZ has indicated that it will keep the OCR rate at a restrictive level in the future to ensure that consumer price inflation returns to its target range of 1-3% per annum, while promoting maximum sustainable employment.

The immediate report after the board’s decision indicated that the RBNZ may already be heading towards the end of rate hikes. Bankers said New Zealand’s monetary policy had reached tighter macro conditions earlier than in other global economies. In addition, domestic consumption is falling as expected and the labor market is showing signs of stabilization. Inflation dynamics are expected to moderate in line with RBNZ forecasts, the bankers added.

The opening session was characterized by high volatility in the NZD/USD pair immediately following the RBNZ decision. Quotes managed to test the area of ​​recent local highs on the H4 range (chart below), but the initial highs have largely been erased. Key to future trades will be today’s release of US CPI data, which will be one of the key elements in future FOMC rate decisions. Analyst consensus is that the annualized reading will decelerate significantly from the momentum seen earlier, while MoM inflation is expected to pick up slightly (MoM core inflation is expected to decline).

14:30 USA – CPI inflation:

  • YY: Expected -3.1% y-o-y, previously -4% y-o-y
  • YoY (excluding food and energy): Expected -5% YoY, Previous -5.3% YoY
  • 1-month: Expected -0.3% MoM, Previous -0.1% MoM
  • 1 month (excl. food and energy): Expected -0.3% m/m, Previously -0.4% m/m

Source: xStation 5

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