Inflation Expectations in New Zealand Ease, Impacting Currency Markets

Inflation expectations in New Zealand ease, impacting currency markets; US CPI data awaited. Central banks maintain rates.

According to recent data, inflation expectations in New Zealand declined in the first quarter of 2024, dropping from 3.6 to 3.2 percent annually. This downward trend exerted pressure on the Kiwi dollar, which hit a low of 0.6095 following the release of the data.

The expectations of easing inflation have implications for the European and US sessions, particularly regarding currency markets. In the United States, although inflation has been on a downward trajectory throughout 2023, recent data suggests a slowing pace of deceleration. The ISM Manufacturing and Services PMI surveys have reported price increases over the past few months, indicating a potential uptick in inflation. If January’s CPI figures confirm this trend, it could spark demand for the dollar during the US trading session.

Market participants are closely watching the Dollar Index (DXY) in light of these developments, eagerly awaiting the release of the Consumer Price Index (CPI) data at 1:30 pm GMT. The Federal Reserve has maintained its Federal Funds Rate target range between 5.25% and 5.50% for the third consecutive meeting, citing an ongoing economic expansion tempered by inflationary concerns.

Gold prices analysts expect will face downward pressure if CPI figures reveal a resurgence of inflationary pressures, leading to increased demand for the dollar during the US session.

Inflation Expectations in New Zealand Ease, Impacting Currency Markets

In Australia, the Reserve Bank has kept the cash rate target unchanged at 4.35%, noting a persistent easing of inflation in the December quarter but with concerns over elevated levels of core inflation. Expect a weak bearish bias in the next 24 hours for the RBA meeting scheduled for March 19, 2024.

Similarly, the Monetary Policy Committee in New Zealand has held the OCR unchanged at 5.50%, expressing confidence that the current rate is curbing demand. However, concerns persist over ongoing excess demand and inflationary pressures. Anticipate a medium bearish bias in the next 24 hours for the February 28, 2024 meeting.

In Japan, the Bank of Japan has reiterated its commitment to Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control (YCC) to achieve a price stability target of 2.0%. The Japanese yen remains weak against the dollar, with USD/JPY trading near recent highs.

In Europe, the Eurozone’s ZEW Economic Sentiment has shown improvement, potentially bolstering the euro during European trading hours. The European Central Bank (ECB) has kept its three key interest rates unchanged for a third consecutive meeting, with a weak bearish bias expected in the next 24 hours.

In Switzerland, inflation has remained relatively stable, with CPI averaging around 2% over the past year. The Swiss National Bank (SNB) has maintained its policy rate at 1.75%, with a weak bullish bias anticipated in the next 24 hours.

Expectations anticipate that the January Labour Force Report will display mixed employment outcomes in the United Kingdom, potentially injecting volatility into the pound during the European session. The Bank of England’s Monetary Policy Committee (MPC) has voted to maintain its Official Bank Rate at 5.25%, with a weak bearish bias expected in the next 24 hours.

The Bank of Canada Target

In Canada, the Bank of Canada has held its target for the overnight rate at 5.0% for the fourth consecutive meeting. Market analysts expect a weak bearish bias in the next 24 hours.

Crude oil prices have remained relatively stable, with geopolitical tensions in the Middle East contributing to potential supply disruptions. WTI oil hit an overnight high of $76.95 per barrel before retreating, with a weak bullish bias anticipated in the next 24 hours.

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