As Aussie and CAD Falls Short, NZD Rises on the Back of Strong CPI

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 The pullback in the Aussie and the CAD is mostly calmed as a result of this. The Yen, on the other side, appears to be easing marginally as the surge fades. The New Zealand dollar has risen sharply again today, as the highest CPI report in a decade has generated more speculation about RBNZ rate increases. The dollar, the euro, and the pound sterling are all in a state of flux. In terms of the week, the Kiwi is by far the best performer, but the CAD and Aussie are the worst so far.

New Zealand CPI rose 1.3% QoQ in the second quarter, well above expectations of 0.7% QoQ. For 12 months The consumer price index accelerated to 3.3% y/y from 1.5% y/y, well above expectations of 2.8% y/y. The annual rate is the highest in almost a decade. In addition, these numbers were well above the RBNZ forecast of 0.6% QoQ inflation of 2.6% YoY.

Rumors of an early increase in the RBNZ rate intensified after the release. Westpac now expects a 0.25% increase in OCR in August, with new gains in both October and November. Today’s events pushed AUD/NZD towards 1.0597 support to resume a short-term decline from 1.0944. A deeper decline can be seen in the lower mid-term range at 1.0415.

Aussie and CAD Lacks Bullish Conviction

Developments in the Australian labor market, particularly wage data, will be crucial in influencing expectations about RBA policy over the next year or two.

The impact of any adjustments on the AUD/USD will be determined by the Federal Reserve’s predicted policy path. It is realistic to expect the AUD/USD to move lower if the RBA is viewed as a policy slacker. As a result, our AUD/USD estimates have been revised lower. By the end of the year, we may see the currency pair edging closer to 0.72.

The Canadian currency, on the other hand, benefited from a rise in crude oil prices. However, escalating COVID-19 outbreaks involving the Delta strain in some nations, as well as concerns about the OPEC+ plan to enhance supply, cast a pall over the black gold’s prospects. As a result, the path of least resistance for the loonie remains negative, implying that the USD/CAD pair can expect further gains.

The USD/CAD pair slipped lower on the penultimate day of the week, eroding some of the previous day’s significant gains to near three-month highs, after struggling to find acceptance above the 1.2600 marks.