NZ dollar holds gains; focus on domestic inflation data

Tuesday 16th July 2019

The New Zealand dollar held its gains ahead of second-quarter domestic inflation data as investors remained cheered by better-than-expected Chinese industrial production and retail sales.

The kiwi was trading at 67.21 US cents at 7:55 am in Wellington from 67.19 at 5pm. The trade-weighted index was at 73.38 from 73.35.

While China’s economic growth was the softest in decades in the June quarter, up 6.2 percent from a year earlier, better-than-expected industrial production growth of 6.3 percent and retail sales growth of 9.8 percent gave sentiment a lift.

“The kiwi leveraged the data to touch a high of 67.35 US cents overnight,” said Kiwibank trader Mike Shirley.

The focus is now shifting to the second-quarter inflation data due this morning. The market is expecting a 0.6 percent quarterly increase in the Consumers’ Price Index, taking the annual growth to 1.7 percent, according to the median estimate from a poll of economists by Bloomberg.

A weak read will mean that markets continue to expect the central bank to cut rates by 25 basis points at the August meeting to 1.25 percent.

While Kiwibank economists are expecting inflation to show a quarterly bounce to 0.7 percent, above the market and central bank’s forecasts of 0.6 percent, they say the outlook is soft.

As a result, they expect the “RBNZ to look through any strength shown in the June quarter. This week’s CPI figures are unlikely to deter the bank from cutting the OCR next month.”

Investors will also be watching for consumer confidence data in Australia and the release of the Reserve Bank of Australia’s July policy meeting.

The New Zealand dollar was at 95.45 Australian cents versus 95.54, at 53.69 British pence from 53.45, at 59.67 euro cents from 59.61, at 72.51 yen from 72.57, and at 4.6206 Chinese yuan from 4.6169.

(BusinessDesk)

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