NZD/USD advances steadily around 0.5640s post-hot NZ CPI

NZD/USD jumped 30 pips on the release of New Zealand’s inflation, surpassing expectations.
NZ hot inflation justifies further RBNZ’s rate hikes.
US NY Empire State Manufacturing Index for October fell more than estimated, at -9.1 vs. -1.5.

The NZD/USD advances as the Asian session begins, following the release of New Zealand’s inflation, jumping more than estimates, propelling the major towards a fresh weekly high at 0.5659, extending its gains amid an upbeat mood. At the time of writing, the NZD/USD is trading at 0.5640, above its opening price by 0.17%.

NZD/USD marches firmly, following New Zealand’s high inflation report

Statistics of New Zealand reported that inflation rose by 2.2% QoQ, above estimates of 1.5%, exceeding the previous quarter’s reading. Of note, the annually-based reading came at 7.2%, above 6.5% YoY estimates, cementing the RBNZ’s case for further tightening.

Analysts at ANZ bank expected CPI to ease to 6.6% and foresaw that the RBNZ Overnight Cash Rate (OCR) would continue on its way to peak at around 4.75% in May 2023.

Aside from this, Asian equity futures are set to open higher, bolstered by US equities, which recorded solid gains, as traders’ mood turned positively following UK’s finance minister Jeremy Hunt, who acted quickly, scrapping his predecessor Kwarteng GBP 45 billion tax cut mini-budget sparked Gilts turmoil. On Monday, Gilts rose, while the GBP/USD rallied more than 200 pips, also a tailwind for NZD/USD.

In the meantime, the US Dollar Index dropped more than 1%, down to 112.065, as the British pound recovery lifted most G8 currencies, a headwind for the buck.

Elsewhere, Fed policymakers, in the last week, kept their hawkish posture, reiterating their commitment to tackling stubbornly high inflation, following a hot US inflation report, particularly core CPI, reaching a 40-year peak above 6.6% YoY.

Data-wise, the US economic calendar featured the US New York Fed Empire State Manufacturing Index for October, which contracted 9.1, vs. a 1.5 drop estimated.

NZD/USD Price Forecast

Therefore, the NZD/USD remains downward biased unless it clears the October 6 cycle high at 0.5813, which could open the door for further upside, exposing key resistance levels at 0.5900, followed by the 100-day EMA at 0.5958, ahead of the 0.6000 figure. On the flip side, a break under 0.5600 will open the door for a YTD low test at 0.5512.