New Zealand CPI q/q 10/14/09

[flv:http://www.newsprofiteer.com/101409-nzdcpi/101409-nzdcpi.mp4 480 360]

5:45pm (NY Time) NZ CPI q/q    Forecast 0.8%   Previous 0.6%
ACTION: NZD/USD       BUY 1.1%      SELL 0.5% 

Our focus will be on the headline CPI number. If we get a better than expected number of 0.8% by 0.3%, we should be looking to BUY NZD/USD; if we get a lower than 0.5%, then we’ll see NZD/USD move down.

With recent RBA (Reserve Bank of Australia) unexpected rate hike, RBNZ (Reserve Bank of New Zealand) is widely expected to hike interest rates next, as both economies are closely correlated.  As this release will undoubtedly push that speculation to a new level since it would give RBNZ Governor Bollard justification to hike rates.  However, if the 3rd quarter CPI turned out to be less than expectation, we could see a possible switch of sentiment on RBNZ hiking rates in the next few meetings, thus add more downward pressure to the NZD than this release would normally do.   In other words, expect a more exggerated response from the market… and to top it off, this release is scheduled at the unholy hours of U.S. evening prior to NIKKEI open, therefore expect to see low liquidity along with this release.

DEFINITION:

“The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation’s currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation’s currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.”

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Tagged as: 3rd Quarter, bank of australia, bank of new zealand, Consumer Price Index, CPI, cpi number, Downward Pressure, Foreign Investment, Headline Cpi, High Impact, index cpi, Inflation, Interest rate, Key Interest rate, liquidity, Nikkei, NZD, price changes, price stability, rate hike, rate of inflation, RBA, Reserve Bank of Australia, Reserve Bank of New Zealand