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The New Zealand dollar has extended its losses for a second successive day. NZD/USD is currently trading at 0.7109, down 0.31% on the day.

New Zealand business confidence slides

The news was grim from the New Zealand Business Confidence index, which fell for a fourth consecutive month. The drop in November was significant, as the index fell to -18.5, down from 13.1 a month earlier. The survey noted that costs for businesses have gone “through the roof”, with some 89% of firms reporting higher costs.

Later in the day, New Zealand releases the Food Price Index for October. This is an important gauge of inflation, as the official CPI release is only once a quarter.

In the US, inflation remains red-hot. On Tuesday, PPI surged 8.6% y/y, its highest annual pace since records began 10 years ago. This was followed today by the October CPI numbers, which were higher than expected. Headline CPI rose 4.6% y/y, compared to 4.0% in September. Core CPI hit 6.2%, up from 5.4% in September. The rise in prices has sent US Treasury yields slightly higher and could climb further, depending on the success of the US Treasuries auction later in the day.

These high numbers do not lend support to the Fed’s argument that inflation is transitory, but the important question is will the markets continue to buy into Jerome Powell’s message that the Fed does not plan to raise interest rates in the near future. However, cracks are forming in the Fed’s stance, with Fed member James Bullard saying on Tuesday that he expects two rate hikes in 2022. The Fed will begin trimming its asset purchases at the end of the month, and today’s inflation data will increase pressure on the Fed to raise rates sooner rather than later.

NZD/USD Technical

  • NZD/USD faces resistance at 0.7215 and 0.7259
  • 0.7129 is a weak support line. Below, there is support at 0.7087

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