RBNZ Inflation Hits Year High, Kiwi Gains

RBNZ inflation expectations rise, boosting NZD; Eurozone trade surplus surges; markets eye U.S. sentiment and SNB speech.

The New Zealand dollar surged past the 0.5900 level in Asia trading on Friday after the Reserve Bank of New Zealand’s (RBNZ) latest quarterly survey revealed inflation expectations climbed to a one-year high. With inflation forecast to average 2.29% over the next two years — up from 2.06% last quarter — and one-year expectations hitting 2.41%, the data added to speculation that the RBNZ could slow the pace of further interest rate cuts, even after five consecutive reductions.

The rise in inflation expectations indicates growing concerns that domestic price pressures may prove more persistent than anticipated. While the RBNZ has eased policy to support growth, Friday’s data may complicate its dovish stance and bolster the Kiwi in the near term.

The data has set an early risk-positive tone for the global currency markets heading into the European and U.S. sessions. Traders are now eyeing developments across the Eurozone, Switzerland, and the U.S. for additional market-moving cues.

RBNZ Inflation Hits Year High, Kiwi Gains

In Europe, the euro could receive a fresh boost after February’s trade surplus came in at €23.9 billion — the highest in over a year. The resurgence in surplus, driven by a rebound in domestic demand and falling borrowing costs, has strengthened investor confidence. While March’s surplus is expected to narrow to €17.5 billion, it would still represent the strongest reading since July 2024, potentially reinforcing the European Central Bank’s cautiously optimistic tone.

The euro is poised for a medium bullish session as the economic backdrop stabilizes and Germany’s fiscal loosening adds to regional momentum.

Traders will also tune into Swiss National Bank Chairman Martin Schlegel’s speech later in Lucerne, titled “Trade war and geopolitical upheaval: Monetary policy in times of uncertainty.” Markets are keen for any indication on how the SNB plans to respond to global trade disruptions and domestic deflationary pressures. With the franc trading on a medium bearish bias, Schlegel’s tone could either extend recent weakness or prompt a sharp reversal if risks are downplayed.

In the U.S., the spotlight is on the preliminary University of Michigan Consumer Sentiment data due at 2:00 pm GMT. After a prolonged slide in the Dollar Index (DXY), any further signs of consumer caution could extend the dollar’s weak bearish trajectory. While forecasts point to a slight improvement in sentiment, persistent inflation risks and trade tensions may weigh on confidence.

A disappointing sentiment reading would likely support gold, which rebounded 3.9% off recent lows. The precious metal enters the session with a medium bullish bias and could climb further on any sign of rising economic anxiety.

Other G10 Highlights

• AUD: The Aussie remains under mild upward pressure (weak bullish) despite recent declines. A solid labour report failed to lift the currency on Thursday, but sustained U.S. dollar weakness may help the pair recover.
• JPY: Japan’s worse-than-expected Q1 GDP reinforced a medium bearish outlook for the yen. However, recent safe-haven flows have boosted the currency, dragging USD/JPY sharply lower.
• GBP: With no key data releases, the pound may extend gains (medium bullish) on the back of U.S. dollar softness and improving domestic momentum.
• CAD: A decline in oil prices continues to anchor the loonie. Despite a broadly weaker dollar, USD/CAD remains range-bound with a neutral to mildly bullish tilt.

Market Outlook

With a confluence of inflation, trade, and consumer sentiment data across major economies, Friday’s sessions in Europe and the U.S. could witness increased volatility. Risk-sensitive currencies like the Kiwi and Aussie are likely to remain responsive to global sentiment shifts, while the euro and franc may pivot on regional fundamentals and central bank signals.

The dollar’s next move hinges on whether consumer sentiment can stabilize amid elevated uncertainty. A weaker-than-expected print could accelerate dollar losses and further buoy commodity-linked and high-beta currencies heading into the weekend.

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