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NZD/USD: weak inflation data _03/08/2016

Technical analysis and trading recommendations -

The New Zealand dollar weakly reacted yesterday to the results of the global dairy auction. The price index for dairy products increased by 6.6%, while prices of whole milk jumped by 9.9%.

Back in late July, the RBNZ presented a report stating that persists for a long time, low inflation and a high rate of New Zealand currency, increasing pressure on the milk and the processing industry, is a negative factor for the development of the national economy.

Managing RBNZ Graeme Wheeler said, then, that "probably require a further easing of monetary policy to ensure that the average inflation rate in the region of the middle of the target range", which is 1% -3%.

Today, with the opening of the trading day the New Zealand dollar declines in the currency market, including in the pair NZD / USD.

Bureau of Statistics New Zealand released the index of wages and the quarterly survey on employment. The data showed a moderate growth of wages and employment in the 2nd quarter. Yesterday the RBNZ has published the quarterly report, which showed that inflation expectations in the 3rd quarter amounted to 1.7% (versus 1.6% in the previous quarter). Inflation expectations for the next 12 months were equal to 1.26% against 1.22% in the previous quarter. The expectations about the pace of growth in consumer prices in the 24 months ahead in the 3rd quarter amounted to 1.65% against 1.64% in the 2nd quarter.

The report indicates that inflation expectations in New Zealand remain low, suggesting downside risks for inflation in the country. Lower oil and commodity prices and the strengthening of the New Zealand currency constitute the main risks for the growth of inflation in the country.

Weak inflation data could make RBNZ at the meeting, which will take place August 10 to lower its key interest rate to 2.0%, and finally, perhaps, to 1.5%.

Yesterday the president of the Federal Reserve Bank of Atlanta Dennis Lockhart said he did not rule out raising interest rates at the next Fed meeting, which will take place in September. Statement Lockhart a few discordant with the opinion of the majority of financial market participants, under which most likely increase in US interest rates in December by 0.25%.

Given the different focus of monetary policies in the US and New Zealand, you should expect a decrease in pair NZD / USD in the medium term.

Wednesday, 03 Aug, 2016 / 10:37

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