Positive risk sentiment and promising developments in China helped lift the Kiwi higher last week. Will this week’s catalyst extend the comdoll’s winning streak?
Quarterly CPI report (April 18, 10:45 pm GMT)
Kiwi bears partied in the pip streets back in January when New Zealand only printed a 0.1% inflation rate for Q4 2017. Not only is it lower than Q3’s 0.5% uptick, but it also missed the 0.4% expected rate. What’s more, it’s also lower than the RBNZ’s estimates of 0.3%!
Consumer prices grew by 1.6% from a year earlier in the quarter, which marks the weakest reading in FOUR quarters and is also slower than the RBNZ’s recent estimates of a 1.8% increase.
Overall, the numbers pointed to the central bank not being on track to raise its rates by June 2019 as their recent estimates suggested.
This time around analysts are expecting a 0.5% uptick for Q1 2018. Think consumer prices had recovered by that much since then? Watch the report in case we see another volatile reaction from the comdoll!
China’s data dump
We’ve seen in the price action below how Kiwi can be affected by developments in China, one of its major trading partners.
On Tuesday at around 2:00 a GMT we’ll see China’s GDP reading, as well as major reports like industrial production, fixed asset investment, and retail sales data.
Upside surprises could bring the bulls to the yard and push the high-yielding Kiwi higher. Consequently, significant misses could have Kiwi traders worrying about the Chinese economy and its ability to import New Zealand products.
Overall risk sentiment
As you can see below, the New Zealand dollar has reacted positively to China maybe easing up on its trade war threats. Not only that, but it has mostly ignored a hawkish FOMC statement in favor of extending its gains.
Can Kiwi still extend its bullish streak this week? Watch out for any headlines that might affect risk sentiment and demand for high-yielding bets for this comdoll!
Last Week’s Price Review
The Kiwi apparently had a repeat of last week’s performance since the Kiwi is the second best-performing currency of the week yet again (as of 7:00 am GMT).
The Kiwi started the new week on a strong footing, thanks to the risk-on vibes on Monday. Like the Aussie, however, the Kiwi encountered sellers when a Bloomberg report made the rounds since the report claimed that China is supposedly studying the possibility of devaluing the yuan “as a tool in trade negotiations with the U.S.,” as well as to tool to “offset the impact of any trade deal that curbs exports.”
The Greenback weakened and risk-taking was still the name of the game during Monday’s U.S. session, though, and so the Kiwi resumed its upswing.
The Kiwi’s rally was then likely sustained by Chinese President Xi Jinping’s speech. As for details, I highlighted in Tuesday’s Asian session recap that Xi Jinping talked about further opening up China’s economy, including a plan to “significantly” lower import tariffs for products including autos, increasing imports, lowering foreign-ownership limits on manufacturing, and expanding protection to intellectual property.
The Kiwi’s rally finally began to stall on Wednesday, very likely because of returning risk-off vibes at the time. Although China’s disappointing CPI report may have also helped to push the Kiwi lower. Dip demand was notable, though, limiting the Kiwi’s losses.
Oddly enough, the Kiwi finally found support and began to trend broadly higher after the FOMC minutes were released. This is rather strange since the minutes presented a hawkish message overall, which should have spooked some Kiwi bulls.
But then again, the FOMC minutes failed to lift the Greenback at the time because geopolitical tensions over Syria were supposedly weighing down on the Greenback, so it’s possible that the Kiwi gained strength because of USD weakness.
In any case, the Kiwi continued to move higher after that before becoming more mixed come Thursday. And this post-FOMC rally, plus the Kiwi’s broad-based strength on Monday and Tuesday, are the reasons why the Kiwi is currently on the winning side.