The New Zealand dollar remains range-bound and is almost unchanged in the Tuesday session. Currently, NZD/USD is trading at 0.7028, down 0.02% on the day.
New Zealand Business Confidence says inflation rising
The well-respected NZIER Business Confidence survey pointed to a slight improvement in business confidence in Q1 of 2021. A net 11% of businesses said they expected worsening economic conditions in the coming months, compared to 16% in the previous quarter. Based on the survey, NZIER projected that GDP would rise by about 2 per cent in the first quarter. The survey noted that cost pressures have been building up, which has led to higher prices. A red hot housing market forced the central bank to implement measures to discourage speculators, and higher inflation would likely require the RBNZ to reconsider its accommodative monetary policy.
RBNZ expected to hold the course
The RBNZ holds its monthly policy meeting on Wednesday (2:00 GMT). The meeting will likely be uneventful, with members expected to reiterate their commitment to monetary stimulus, in order to reach the inflation target of 1-3%. The bank is expected to maintain interest rates at 0.25%, where it has been pegged for over a year. The bank has not utilized all of the QE available under the LSAP, which has a ceiling of NZD 100 billion. This means the bank is unlikely to increase QE. What will be of more interest to investors is the rate statement, which could provide hints as to future monetary policy.
US CPI rises slightly
US consumer inflation was slightly higher in March, but not enough to have a significant impact on the US dollar. Headline CPI came in at 0.6%, up from 0.4%. Core CPI also improved, rising from 0.1% to 0.3%. These readings edged above the forecasts, but it’s unlikely that the numbers will make the Fed rethink its ultra-accommodative stance. Stronger inflation is another sign that the US recovery continues to gain traction, but the Fed will likely reiterate that the present level of QE is needed to support the economy.
NZD/USD Technical
With NZD/USD rangebound, the weekly support and resistance levels remain unchanged:
- NZD/USD is facing resistance at 0.7071. This is followed by resistance at 0.7107
- There is support at 0.6998. Close by, there is support at 0.6961
