USD to NZD Rate Gets Moving as Kiwi Falls on Soft NZ Inflation

The USD to NZD rate was consolidating in a tight range after the 3 cent crash since the start of October, as the USD buying momentum slowed. However, the decline has resumed on NZD weakness now, as inflation falls to the RBNZ range for the first time in two years, sending NZD/USD to last week’s low.

Despite the recent US inflation data coming in higher than expected, the bullish momentum for the US dollar seems to be waning. Early this month, the NZD/USD pair dropped over three cents, but that decline stalled and the price stabilized for several days. It’s worth noting that the market has already adjusted its expectations lower for FED rate cuts, aligning with the Fed’s outlook. For the US dollar to gain additional support, it will likely take a stronger stream of positive US economic data.

However today markets will focus on the NZD side, with the US being closed for Columbus Day. As anticipated, the RBNZ yesterday lowered interest rates by 50 basis points. Given that the market is pricing an 88% chance of another consecutive 50 basis point decrease in November, last night’s New Zealand Q3 CPI inflation report was softer than expected.

New Zealand’s Q3 CPI came in at 0.6% quarter-on-quarter, just below the expected 0.7%, and up from 0.4% in Q2. The annual CPI matched expectations at 2.2% year-on-year, though it has dropped from 3.3% in Q2. Non-tradable prices rose by 1.3% for the quarter and 4.9% annually, while tradeable prices fell by 0.2% for the quarter.

New Zealand Q3 CPI Inflation Report

• New Zealand Q3 CPI rose by 0.6% quarter-over-quarter, slightly below the 0.7% expected (Q2 was 0.4%).
• Year-over-year, Q3 CPI matched expectations at 2.2%, a decline from 3.3% in Q2.
• Non-tradable prices increased by 1.3% quarter-over-quarter and 4.9% year-over-year.
• Tradeable prices fell by 0.2% quarter-over-quarter.

NZD/USD Live Chart