New Zealand’s Fourth quarter inflation figures will be released on Tuesday, January 23 at 21:45 GMT. Economists at ING analyze NZD/USD outlook ahead of the Consumer Price Index (CPI) report.
New Zealand CPI to be soft
We expect a 0.4% QoQ print which translates into 4.6% YoY. Consensus is centred at 4.7%, signalling that expectations are for a marked undershot compared to the latest RBNZ fourth quarter CPI projections at 5.0%.
Markets are already pricing in 95-100 bps of easing by the end of the year in New Zealand, meaning that NZD is probably more likely to be affected by stronger data and hawkish RBNZ surprises than by a data-miss/dovish surprise combination. For this reason, we think that NZD/USD will not get hit hard as the RBNZ pivots to a more dovish stance and still favour the pair to trade higher from the second quarter on the back of a weaker USD and improved risk environment.
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