- The NZD/USD price fell slightly as traders reacted to New Zealand’s consumer price index data.
- Consumer prices rose by 0.7% in the third quarter, lower than the estimated 0.9%.
- The CPI was an improvement from the 0.5% decline in the second quarter.
The NZD/USD price is in a tight range as traders react to New Zealand’s third-quarter inflation data. It is trading at 0.6667, which is slightly below yesterday’s high of 0.6690.
New Zealand consumer prices rise
Consumer prices in New Zealand bounced back in the third quarter as the country continued its recovery process. The headline consumer price index (CPI) rose to 0.7% in the quarter, pushing the annual rate of inflation to 1.4%. The median estimate by analysts polled by Reuters was for a 0.9% quarter-on-quarter increase and a 1.7% year-on-year increase.
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According to Statistics New Zealand, the rise in inflation was mostly because of higher vegetables and rates. Vegetables rose because of shortages and strong demand, especially from restaurants and cafes. The report said:
“Because restaurants and cafes were shut during COVID alert levels 3 and 4 in April, many tomato growers delayed or reduced planting their crops during this time because they were not sure if demand would recover.”
Meanwhile, rates charged by city councils grew by 3.1%, the smallest annual increase in 20 years while the price of petrol rose by 1.7% because if an excise tax. In the same quarter, rents rose by just 0.5% while domestic airfares rose by 5.7% even as business activity eased. Further, the price of cellphones declined by 15% after rising sharply in the first and second quarters.
Recovery path
New Zealand economy has been on a recovery path mostly because of how the country handled the pandemic. The country has confirmed only 5,000 Covid-19 cases and just 25 deaths. It has also managed to quash the second wave of the virus without any casualty.
At the same time, the government and the central bank have unleashed their biggest stimulus on record. The central bank has brought rates to zero and initiated its first quantitative easing program. In this program, it will buy up to $100 billion worth of bonds. The bank has also warned that it could be forced to implement negative interest rates.
The government, on the other hand, is spending more than N$12.1 billion to support the economy. The funds will go towards wage subsidies, bolstering the healthcare sector, and providing more support to the vulnerable.
NZD/USD technical outlook
On the four-hour chart, we see that the NZD/USD price dropped from yesterday’s high of 0.6690 to the current 0.6667. This price is slightly above the 15-day and 25-day exponential moving averages. It has also moved slightly below the first resistance level of the standard pivot points. Most importantly, the pair has moved below the important resistance shown in green. Therefore, I suspect that the pair will continue falling today as bulls attempt to retest the pivot point at 0.6620.
