NZD/USD forecast as New Zealand inflation rockets higher

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Oct 18, 2021
  • The NZD/USD pair held steady after the New Zealand GDP data.
  • The country’s consumer inflation rose to 4.9% on a year-on-year basis.
  • Analysts expect that the RBNZ will maintain a hawkish stance.

The NZD/USD pair hovered near its highest level since September 16 as investors reflected on the latest New Zealand consumer inflation data. The pair is trading at 0.7073, which is 3% above the lowest level in September. 

New Zealand inflation

The third quarter was a difficult one for New Zealand as the country recorded its first Covid case in months. As a result, the government announced a major lockdown in a bid to contain the crisis. This performance, therefore, disrupted the strong recovery that was going on before. 

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The New Zealand economy also experienced higher consumer prices in the third quarter. According to the statistics agency, New Zealand’s consumer price index (CPI) rose from 1.3% in Q2 to 2.2% in the third quarter. This performance was better than the median estimate of 1.4%. 

New Zealand’s inflation rose from 3.3% to 4.9% on a year-on-year basis. This was the fastest pace of growth in decades. 

There are two main reasons why the country’s inflation jumped. First, as an oil and gas importer, consumers paid more as the prices rose. This trend will continue in the fourth quarter since the prices have continued rising. 

Second, like all countries, New Zealand is suffering from the ongoing supply chain challenges. These challenges stem from the rising international demand and relatively fewer workers in major ports. As a result, this cost has been passed to consumers.

New Zealand is not alone since other countries are seeing their prices jump. For example, data published last week showed that the US consumer inflation rose to 5.4% in September. This was the highest level since 2008.

The NZD/USD rose modestly because analysts already know what the RBNZ will do. In its last interest rate decision, the bank hiked interest rates and pointed that more would come.

NZD/USD forecast

NZD/USD

The NZD/USD pair has been in a strong bullish trend in the past few weeks. It has risen by more than 3% from the September low. Also, it has moved above the 25-day and 50-day moving averages. The pair has also moved above the Ichimoku cloud while the Relative Strength Index (RSI) and MACD have kept rising. Therefore, the pair will likely keep rising as bulls target the key resistance at 0.7170.

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