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NZ dollar holds above 70 US cts ahead of inflation survey, RBNZ

Tuesday 8th May 2018

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The New Zealand dollar held above 70 US cents ahead of today's survey of inflation expectations and in the lead-up to Reserve Bank governor Adrian Orr's first monetary policy statement on Thursday. 

The kiwi traded at 70.13 US cents as at 8am in Wellington from 70.16 cents yesterday, while the trade-weighted index was unchanged at 73.34, still below the 75 level the Reserve Bank projected as an average for the second quarter in its last monetary policy statement.

Inflation expectations will be keenly watched in the Reserve Bank's survey of expectations for the June quarter as consumer price increases remain near the bottom of central bank's target band. Local economists have commented that recent declines in the currency may create some inflationary pressure, given the tradeable component has been negative in recent years, creating a new dynamic for Orr at this week's policy review. The RBNZ is expected to keep the official cash rate at 1.75 percent and retain a flat track, putting it at odds with the Federal Reserve which is likely to keep hike the federal funds rate. 

"Today, the focus will be on inflation expectations in the RBNZ survey," ANZ Bank New Zealand chief economist Sharon Zollner and economist Daniel Wilson said in a note. "That said, NZD is unlikely to react strongly to the data." 

The US dollar Index, a measure of the greenback against a basket of currencies, edged up 0.2 percent while Brent crude oil rose 0.7 percent to US$75.41 per barrel. US President Donald Trump is expected to make a decision on whether to re-impose sanctions on Iran tomorrow at 2pm NZ time, which analysts predict could reduce world oil supply by as much as 1 million barrels a day, while Fed chair Jerome Powell is to deliver a speech on Wednesday in the US. 

Local data today includes the New Zealand government's Crown accounts for the nine months ended March 31, which will provide some insight ahead of this month's budget. 

The New Zealand dollar traded at 93.31 Australian cents from 93.34 cents yesterday ahead of the Australian federal government budget. 

The kiwi dipped to 51.71 British pence from 51.81 pence yesterday and increased to 58.83 euro cents from 58.70 cents. It rose to 4.4631 Chinese yuan from 4.4617 yuan yesterday and decreased to 76.47 yen from 76.59 yen. 


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