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NZ dollar battered by weak domestic CPI, eyes on Australian data

Thursday 18th April 2019

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The New Zealand dollar remained weak despite better-than-expected Chinese data helping lift risk sentiment.

Domestic inflation data yesterday was soft and investors are now focusing on jobs growth in Australia for similar signs of a slowdown. 

The kiwi was trading at 67.19 US cents at 8am in Wellington versus 67.30 at 5pm yesterday. The trade-weighted index was at  72.71 points from 72.85.

The kiwi took a tumble yesterday as weak domestic inflation data upped speculation that the central bank might cut rates in May. It gained back some ground when China said its economy grew at a 6.4 percent pace in the first quarter, exceeding the forecasts of many economists. Industrial production and retail sales were also positive. The gains, however, were muted. 

"Firm China data lifted risk sentiment but the kiwi found little support as the weaker headline CPI print continued to weigh. Expect the kiwi to lag its peers in the near term as markets increase the odds of an OCR cut in May," said ANZ FX/rates strategist Sandeep Parekh. 

Today, investors will be watching for Australian jobs data, in particular after the Reserve Bank of Australia underscored the importance of the data in its latest minutes.

"Looking forward, the board will continue to monitor developments, including how the current tensions between the domestic GDP and labour market data evolve," the RBA said in its latest minutes. 

Economists are expecting Australia's economy to have created 15,000 new jobs in March and for the employment rate to tick up to 5 percent from 4.9 percent, according to a Bloomberg poll. If the data is weaker, it will add to the view that the RBA may also move to cut interest rates.

Australian business confidence data will also be watched. 

The kiwi was trading at 93.66  Australian cents versus 93.59 and was unchanged at 51.52 British pence. It was at 59.45 euro cents from 59.53, at 75.30 Japanese yen from 75.36 and at 4.4930 Chinese yuan from 4.5121.


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