Zero Inflation Growth in New Zealand hurts the NZD

imports, kiwi, dollar, new zealand, gdpNew Zealand, this morning, released inflation data with their core price index (CPI). After the weaker than expected print with inflation, the NZD/USD fell lower. The Kiwi dollar was weaker against most of it major Forex trade partners.

The quarterly inflation number, or CPI, came in at 0.0 percent growth for the second quarter (Q2) of 2017. This was compared to 0.2 percent expected and 1.0 percent seen in the first quarter. The annual number for the CPI grew 1.7 percent. This was well below analyst expectations of 1.9 percent. As well as the 2.2 percent seen in the second quarter.

Transportation prices accounted for the large quarterly drop in the CPI data. They fell 1.3 percent. In annual numbers, telecommunication prices led the way lower. They lost a whopping 4.6 percent.

The Kiwi Dollar Reacts to Weak Inflation

The local currency fell against the greenback after the news. The Kiwi lost ground against all of its major Forex trade partners by more than half of a percent. Against the US Dollar, the NZD shed 0.6 percent.

The new probability of a rate hike, according to index Swaps, in 2018 fell from 82 percent to 79 percent. Soft inflation growth likely seen as pushing back the need for stimulus withdrawal from the Reserve Bank of New Zealand (RBNZ). The next Reserve Bank of New Zealand monetary policy and interest rate meeting is scheduled for August 10. One month from now.

It should be noted that the US GOP and President Donald Trump could not pass their healthcare reform bill. This will lead to general weakness with the US dollar.

David Frank

David Frank

Chief Market Strategist at CupO'Forex
David has his MA and PhD in Economics. He is a technical analyst who has been trading in the Forex world for over a decade. As an analyst and trader, David believes in the big picture by blending together technical analysis with the fundamentals behind the scenes in the Forex and Bond markets. David’s trading strategy is unique. He blends an understanding of fundamental and macroeconomics with technical analysis to offer a unique view into Forex. He applies several strategies including carry long positions, to take advantage of high yields in non-volatile markets, as well as using quicker, chart related analysis for day trading.
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