NZDUSD erases nearly 100% of its early losses, rebounding from the 100-period exponential moving average (EMA100, dark purple).
The initial drop was a reaction to the latest CPI reading. While consumer price inflation did accelerate compared to Q1 (2.7% vs 2.5% previously), the increase fell short of market expectations, set at 2.8%. The quarterly figure also came in below forecasts (0.5% vs 0.6% previously).
The latest data reinforced the sentiment that there is room for further monetary policy easing in New Zealand. The last rate cut took place in May (from 3.5% to 3.25%), and the June pause appeared more precautionary in nature — the RBNZ had anticipated an acceleration in Q2 inflation, with a continued weakening trend in the face of the disinflationary impact of tariffs.
Interestingly, we do not see similar resilience from the New Zealand dollar against the euro (EURNZD: +0.25%). While neither the ECB nor the Fed is expected to cut rates in July (at least according to markets), the U.S. central bank has more room to ease, whereas the ECB has only one more standard 25 basis point cut left at its disposal. A drop below 1.75% in the Eurozone would already signal an effort to counter real deflationary pressure and to shield the European economy from a slowdown in the face of a trade war with the U.S.
NZDUSD is trading flat after rebounding from the 100-period EMA on the daily chart. EURNZD (inverted, in blue) shown for comparison. Source: xStation5
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