Cooling NZ inflation leaves New Zealand Dollar lagging

• Weaker-than-forecast NZ Q3 CPI figures push the New Zealand Dollar lower against its peers.
• New Zealand CPI increased by 0.7% in Q3, below forecasts of 0.8% and the previous quarter’s 1.5% reading.
• Renewed strength in the US Dollar has added to pressure on the Kiwi pair.

Following weaker-than-expected New Zealand Q3 inflation figures, the New Zealand Dollar (NZD) is losing ground against its major currency counterparts on Thursday. During the European session, it is down 0.25% against the US Dollar (USD), trading near 0.5679.

New Zealand Dollar Slips as Inflation Falls Short of Forecasts

New Zealand (NZ) Q3 Consumer Price Index (CPI) figures came in below expectations, putting pressure on the Kiwi dollar.

Describing NZ Q3 CPI as having “undershot expectations,” strategists at Brown Brothers Harriman (BBH) point to a headline CPI increase of “0.7% q/q vs. 1.5% in Q2, below the 0.8% rise forecast by consensus and RBNZ.”

BBH nevertheless maintains that “above target inflation and still elevated oil prices argue for additional RBNZ rate hikes.” On market pricing, the strategists note that “the swaps curve price in 85% odds of a 25bps RBNZ rate hike to 3.00% on October 28 and more than 100bps of tightening over the next twelve months to 3.75% - near the upper end of the RBNZ’s estimated neutral range of 2.20%-4.10%.”

A recovering US Dollar is also keeping the Kiwi pair under pressure. After returning to a three-week low near 101.45, the US Dollar Index (DXY) has rebounded towards 101.66. The index tracks the Greenback against six major currencies.

Attention now turns to October's flash US S&P Global PMI release, due on Friday, which will be the next focus for investors.

NZD/USD Holds Above 20-Day EMA as Technical Outlook Improves

Having regained the 20-day exponential moving average (EMA) at 0.5661, NZD/USD stands at 0.5678 at the time of writing. Holding above this short-term trend indicator gives the near-term outlook a mildly bullish tilt. On the daily chart, the Relative Strength Index (RSI) has moved back into neutral-to-positive territory near 51. This points to easing downward pressure and suggests scope for the recovery to continue, provided the pair retains support above the EMA.

The 20-day EMA at 0.5661 provides the first support level on the downside. A break below it would weaken the emerging positive outlook and bring the recent lows back into view. While NZD/USD remains above this moving average, buyers are likely to step in on dips. The focus is therefore on whether the pair can establish a base for a more lasting rebound over the coming sessions.

(The technical analysis of this story was written with the help of an AI tool. Know more.)