NZD/USD extended a rebound from a 26-month trough on Monday, after New Zealand’s CPI inflation reached a three-decade peak, while exceeding market expectations and adding to the possibility of a huge interest rate hike from the Reserve Bank of New Zealand.
The country’s annual consumer price inflation was reported at 7.3% in the second quarter, accelerating from 6.9% in Q1. It has been the highest annual inflation since Q2 of 1990, according to Statistics New Zealand.
The quarter-on-quarter CPI increase was 1.7%, following a 1.8% surge in Q1.
Many expect the Reserve Bank of New Zealand will hike interest rates by 50 basis points in August, but still, the red-hot inflation reading has reinforced the prospect of a super-sized move – similar to RBNZ’s global peers.
“A 75 bp hike at the August (monetary policy statement) is a very real possibility, particularly if the labour market data on 3 August delivers another hawkish surprise,” ANZ analysts wrote in an investor note.
Last week, the RBNZ’s official cash rate was raised to 2.50% in a continuing string of hikes.
The central bank has indicated it will bring the cash rate up to 4.0% by mid-2023. Before the latest inflation data print, the majority of analysts had not anticipated a move that far.
As of 8:58 GMT on Monday NZD/USD was edging up 0.30% to trade at 0.6175. Last week the major Forex pair went down as low as 0.6060, which has been its weakest level since May 19th 2020 (0.6033).
NZD/USD has retreated 1.04% so far in July, following another 4.20% slump in June.
Daily Pivot Levels (traditional method of calculation)
Central Pivot – 0.6148
R1 – 0.6185
R2 – 0.6213
R3 – 0.6249
R4 – 0.6286
S1 – 0.6120
S2 – 0.6084
S3 – 0.6056
S4 – 0.6027