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NZ dollar little changed ahead of June qtr inflation; Fed's Powell testimony

Tuesday 17th July 2018

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The New Zealand dollar was little changed ahead of local inflation figures, which will firm up views on whether the Reserve Bank has scope to cut the official cash rate any further, and as Federal Reserve chair Jerome Powell prepares semi-annual testimony. 

The kiwi traded at 67.68 US cents as at 8am in Wellington from 67.74 cents yesterday. The trade-weighted index was at 72.49 from 72.58. 

Economists predict New Zealand's consumers price index rose 0.5 percent in the three months ended June 30, maintaining a tepid pace of inflation and supporting record low interest rates which are becoming less attractive for investors as the US hikes rates. Reserve Bank governor Adrian Orr has left the door open for a rate cut, and ANZ Bank New Zealand economists are more bearish on the local outlook, predicting a 0.1 percent increase due to weaker imported inflation. 

"A result in line with our views would see the market further entertain the idea of an RBNZ rate cut and leave the NZD on the defensive, even though market positioning remains extremely short," ANZ senior macro strategist Philip Borkin said in a note. "Direction today will no doubt be determined by the local CPI figures, which if ANZ is correct, should see the NZD testing support again. Any in-line or upside surprise could result in a decent squeeze higher."

Local residential property sales and prices are also scheduled for release and are expected to show the housing market continues to cool. 

Investors are also waiting for Fed chair Powell's testimony to the Senate today on monetary policy, where he will likely be questioned about how the growing trade tensions between the US and China will affect the world's biggest economy and the central bank's rate outlook. China's latest retaliation to US tariffs is a complaint to the World Trade Organisation over President Donald Trump's threat of imposing an additional US$200 billion of tariffs on Chinese goods. 

The local currency was almost unchanged at 91.23 Australian cents from 91.22 cents yesterday and decreased to 76.01 yen from 76.17 yen. It traded at 51.15 British pence from 51.14 pence yesterday and slipped to 57.80 euro cents from 57.93 cents. The kiwi fell to 4.5268 yuan from 4.5314 yuan yesterday.


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