Asian Session Recap: Kiwi Shoots Up on Strong NZ Inflation Report

Except for the Kiwi which was boosted by a strong inflation data, the major currencies were mostly stuck in tight ranges during the Asian forex trading session.

  • NZ Q1 2017 CPI jumps by 1.0% vs. 0.8% uptick expected, 0.4% previous
  • Japan hits first annual trade surplus in six years
  • AU NAB quarterly business confidence report remains at upwardly revised reading of 6
  • PBoC devalues yuan by most in three weeks

Major Events:

New Zealand’s CPI report – The Kiwi got a boost early into the Asian session after New Zealand printed a better-than-expected inflation report.

Consumer prices in New Zealand rose by 1.0% in Q1 2017 and beat the expected 0.8% gain and 0.4% uptick in Q4 2016. A closer look tells us that the 4.0% jump (following a 0.3% decline) of alcoholic beverages and tobacco had a lot to do with the improvement.

It’s important to note, however, that (a) taxes for cigarette and tobacco are regularly raised in March and (b) the RBNZ has already said that inflation will be “variable over the next 12 months due to one-off effects from recent food and import price movements.”

So why did the Kiwi jump? One possible reason is that even the annualized figures showed strength.

Prices increased by 2.2% from a year earlier in Q1, which is not only much higher than Q4 2016’s 1.3% increase but also marks the fastest inflation rise since Q3 2011.

Food and transportation prices contributed the most, apparently. Year-on-year food costs popped up by 1.6% thanks to a 4.4% increase in fruit and vegetable prices. Meanwhile, transport prices shot up by 3.5% thanks to higher petrol (+12%) prices.

Excluding volatile items such as petrol and tobacco, consumer prices are still up by 1.5%.

Japan’s trade balance – Japan’s markets took a breather earlier today thanks to a pause in the yen’s strength and a better-than-expected trade data.

The world’s third largest economy recorded a trade surplus in 2016 fiscal year ended in March, its first since 2011 when nuclear power plant meltdowns necessitated higher oil imports.

Fewer shipments of cars and iron and steel products dragged exports 3.5% lower in 2016, while lower prices and less demand for oil and liquefied natural gas pushed imports 10.2% lower from a year earlier. Overall, Japan posted a 4.01T JPY surplus for the fiscal year.

On a monthly basis, exports jumped by 12.0% from a year earlier in March and marked its fourth consecutive monthly gain due to improving global demand. Analysts had only expected a 6.7% increase after seeing February’s 11.3% uptick.

Meanwhile, higher coal and oil demand pushed imports 15.8% higher from a year earlier in March. Analysts had only expected a 10.4% increase after February’s 1.2% climb. Overall, the numbers translated to a trade surplus of 6.15T JPY, which is better than the expected 5.76T JPY surplus.

Market Movers:

NZD – The Kiwi was king of pips during the Asian session after New Zealand printed better-than-expected consumer price reports.

NZD/USD jumped to a session high of .7045 before settling in with a 35-pip gain (+0.50% ) to .7037 while NZD/JPY popped up by 49 pips (+0.64%) to 76.68.

Other currencies also bowed down to the Kiwi with EUR/NZD falling by 73 pips (-0.48%) to 1.5235, GBP/NZD dropping by 87 pips (-0.48%) to 1.8178, AUD/NZD sliding by 40 pips (-0.37%) to 1.0667, and NZD/CAD shooting up by 47 pips (+0.50%) to .9484.

Watch Out For:

  • 6:00 am GMT: German PPI expected to remain at 0.2%