A marked slowdown in New Zealand’s Consumer Price Index (CPI) may spark a bearish reaction in NZD/USD as it encourages the Reserve Bank of New Zealand (RBNZ) to keep the cash rate at the record-low throughout 2017.

Why Is This Event Important:

With Governor Graeme Wheeler scheduled to depart in September, the RBNZ appears to be on course to retain the current policy for the foreseeable future as the central bank argues ‘The increase in headline inflation in the March quarter was mainly due to higher tradables inflation.’ As a result, the RBNZ may continue to endorse a wait-and-see approach at the next meeting on August 10 as officials warn ‘GDP growth in the March quarter was lower than expected.’

Impact that the CPI report has had on NZD/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

1Q

2017

04/19/2017 22:45:00 GMT

2.0%

2.2%

+34

+7

1Q 2017 New Zealand Consumer Price Index (CPI)

NZD/USD 15-Minute

New Zealand’s headline reading for inflation climbed to an annualized 2.2% from 1.3% during the last three-months of 2016 to mark the fastest pace of growth since 2011. Signs of heightening price pressures may push the Reserve Bank of New Zealand (RBNZ) to alter the monetary policy outlook, but Governor Graeme Wheeler appears to be in no rush to lift the official cash rate off of the record-low as ‘numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.’ The New Zealand dollar gained ground following the CPI report, but the market reaction was short-lived, with the pair pulling back from a high of 0.7052 to end the day at 0.7011.