New Zealand dollar, NZD / USD, inflation, bond yields – talking points
- New Zealand Dollar sees inflows as Q2 inflation exceeds estimates
- Asia-Pacific stock markets are on track and will reach a higher point in a week
- NZD / USD tightens 26-day EMA higher, will it be exceeded?
Friday’s Asia-Pacific outlook
The Asia-Pacific market is a mixed trading week, with major region-wide stock index growth modest, while most currencies fell against a stronger stock US dollar. Wall Street equities closed mostly lower, with the Russell 2000 index, which had a small capitalization, showing a sharp decline of 3.93% during the week. Falling Treasury revenues have worked against cyclical transactions.
The New Zealand dollar saw an inflow this morning after inflation in the second quarter surpassed 3.3% from a projected 2.7% and rose from 1.5% in the first quarter. In the island nation, PMI’s print run also rose in June, rising from 58.6 to 60.7. The rise in inflation confirms the New Zealand Reserve Bank’s (RBNZ) outlook for price increases in the near future. The July Monetary Policy Statement (MPS) contained the following:
“The Committee reiterated that headline CPI inflation will be in the near future in June and September. They reflect factors that are either one-off, such as high oil prices or expected to be temporary, such as supply shortfalls and higher transport costs. “
This means that RBNZ’s policy path is likely to remain unchanged, given their temporary view on inflation, such as the Federal Reserve’s position. But unlike the Fed The RBNZ has already begun to withdraw policy. The Large-Scale Asset Purchase (LSAP) will end on July 23, a move seen as the start of a rise in the central bank’s official cash rate (OCR), placing it close to the front of the pack to alleviate post-pandemic policies. Friday’s inflation release justifies the hawkish outlook.
New Zealand government bonds were sold in response to a peculiar move by the ICC that raised yields. The 10-year yield on the Kiwi bond is rising above 6% on time this week. Elsewhere, Treasury and Australian government bond yields continued to decline, falling by 4.55% and 7.01% respectively. The ten-year spread between New Zealand and Australian bonds widened to 37 basis points this week, as can be seen AUD / NZD falls by more than half a percent. The national currency usually strengthens when the yield gap widens, as a higher benchmark attracts foreign capital.
The chart is created using TradingView
After China’s second-quarter GDP publications met expectations, the Chinese yuan trades mainly unchanged against the US dollar. Retail sales and industrial production also fell short of expectations and confirmed the slowdown in economic growth. The data has sparked speculation that the People’s Bank of China may pursue the policy more broadly reduction of banks’ reserve requirements.
NZD / USD technical outlook:
The New Zealand dollar received steam against the US dollar this morning, fueled by higher-than-expected inflation. The 26-day exponential moving average (EMA) turned up one-day increment after the previous day’s sessions were pressured by price increases. The MACD and RSI oscillators are both higher, indicating that an upward move can be won.
NZD / USD 8-hour chart
The chart has been created TradingView
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– Written by DailyFX.com analyst Thomas Westwater
Use the comments section or below to contact Thomas @FxWestwaterTwitter