New Zealand’s inflation accelerates above the RBNZ’s target midpoint

Overnight, New Zealand’s CPI rate for Q1 surged to +2.2% yoy from +1.3% in Q4. This was the first time in 5 yearsinflation propped above the midpoint of the RBNZ’s inflation target range of 1-3%. Although StatsNZ noted that inflation was lifted by rising petrol prices and the annual rise in cigarette and tobacco tax, excluding those, the CPI rate stands at +1.5 yoy which is still within the Bank’s target band.
At its latest gathering, the Bank kept the door open for further easing, and noted that it expects inflation to return to the midpoint over the “medium-term”. As such, we think that today’s acceleration above that midpoint diminishes significantly the likelihood for any further rate cuts by the Bank, at least at the upcoming gatherings. This view is amplified by the fact that the nation’s 2-year inflation expectations have been in a positive trend recently and they are now almost in line with the Bank’s midpoint as well.
NZD/USD was waiting for the data near the 0.7000 (S1) key support and spiked higher as soon as the numbers were out. The price structure on the 4-hour chart suggests that the short-term outlook of the pair is somewhat positive. On the 13th of April, the rate emerged above the downtrend line taken from the 7th of February and since then, it’s been printing higher peaks and higher troughs. A break above the 0.7050 (R1) hurdle is possible to initially aim for the next resistance of 0.7075 (R2), where another break is possible to target the 0.7110 (R3) barrier.

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