The New Zealand dollar jumped dramatically to a monthly high versus the USD at 0.7105 this morning. That was following the release of New Zealand inflation data that far exceeded market expectations.
However, its position receded back to the 0.7050s range when this news was written at the start of the European session. The New Zealand Statistics Agency reported something.
It is an information that the consumer inflation increased by 2.2 percent (Quarter-over-Quarter) in the third quarter of 2021. In fact, the rate in the June quarter was only 1.3%.
Meanwhile, The market participants only expected an inflation increase of 1.4% in the September quarter. The record of 2.2% represents the highest quarterly increase since the 1980s.
The Raising Interest Rate is Almost There
The annual inflation rate also soared to 4.9 percent in the third quarter of 2021. In fact, the market participants had previously only expected an increase of up to 4.1%..
These data guarantee the Central Bank of New Zealand (RBNZ) where they will raise the interest rates again in the near future. Earlier this month, the RBNZ announced its first rate hike.
It is the first one in seven years to keep the inflation rate in its target range at 1-3% and "cool" the property market. The continued spike in that data indicates that the policy is not sufficient enough.
The analyst had expected that the RBNZ will raise (interest rates) at the next two meetings, and these (inflation data) results will keep them on track to get there.
This prediction was said by Ben Jarman, the Chief Australian and New Zealand Economist at JPMorgan. The calculation like that is really possible for the current situation.
The NZD/USD Climbed for a Moment
Despite the positive catalyst explained above, the NZD/USD pair was only raising for a moment. A number of factors limited its bullish rally in the short term Period so far.
That was including the disappointing Chinese GDP data and the toughness of the USD appreciation. There is also uncertainty about how far the RBNZ will "boldly" go.
It is especially on the announcement of its next rate hike. For the interest rate market, it's not about what the RBNZ will do next - which is pretty clear. So, what it is about?
That is actually more about how much (rate hikes) they may need to do in the future. That is a statement from Sharon Zollner, Chief Australian and New Zealand Economist at ANZ.
Meanwhile, the AUD/USD was also Increasing
On Tuesday, the Australia's central bank released the minutes of its October meeting that were generally about the same as the previous minutes. The change was not that significant.
The RBA's policy-making board began the discussions which was highlighting the global economic developments by noting that the recovery in developed economies continued.
It is especially until the end of the third quarter of the year. Vaccination rates that are already at the safe levels have prompted many developed countries to loosen their social restrictions.
This of course will support the business sector which will ultimately have a positive impact on a labor demand. Some countries have even reported the labor shortages Lately.
Vaccination Have Supported the Recovery
If this continues, then an increase in wage rates is inevitable. In addition, the increase in commodity prices on international markets also boosted the outlook for global inflation.
Turning to domestic economic developments, the RBA officials noted that rapid vaccinations in have been done in some states with high numbers of COVID-19 cases such as New South Wales and Victoria.
The good thing is that those have prompted a faster-than-expected recovery. RBA members also argue that the Australia's business and consumer sentiment surveys have so far been fairly resilient.
