New Zealand released fourth quarter inflation figures overnight. Headline CPI was flat at 2.2% versus expectations for 2.1%, while the closely monitored non-tradable index slowed slightly faster than expected from 4.9% to 4.5%, the lowest level since the fourth quarter of 2021 and 0.2% below the Reserve Bank of New Zealand's November projections, ING’s FX analyst Francesco Pesole notes.
“This set of figures paves the way for a 50bp RBNZ cut at the 19 February meeting, which markets are now fully pricing in. We expect that 50bp move to be followed by at least two more 25bp cuts to take rates to 3.25%, as the RBNZ is following the widespread shift in central banks to growth concerns and should be keen to frontload some easing.”
“In the short term, NZD/USD can find some support beyond the 0.570 mark as markets see the risks of US tariffs on China as tentatively lower. NZD was the biggest short in G10 according to latest CFTC positioning data, so the technical picture is supportive despite the recent rebound. Ultimately, Trump’s trade agenda will determine how far NZD/USD can recover. From a domestic perspective, the RBNZ should give little support to its currency.”
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