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One of the spotlights will turn to New Zealand’s inflation data in the upcoming Asian session. Market are expecting quarterly CPI to rise 0.5% qoq in Q4, slowed from Q3’s 1.8% qoq. Annually, CPI is expected to fall from 5.6% yoy to 4.7% yoy.

Should these predictions materialize, the results would fall significantly below RBNZ’s forecast from the November Monetary Policy Statement, which projected 0.8% qoq and 5.0% yoy, although the annual rate remains well above 1-3% target band.

There is a divergence of opinions regarding RBNZ’s interest rate path this year. While some economists hold the view that OCR will remain at 5.50% through 2024, 2-year swap market is fully pricing in an OCR cut as early as May. Therefore, the inflation data set to be released tomorrow is poised to play a critical role in reshaping these rate cut expectations.

NZD/USD’s fall from 0.6368 lost much momentum after breaching 0.6083 support, but there is no sign of a rebound yet. Sustained break of 0.6083 will strengthen the case that this decline is the third leg of the corrective pattern from 0.6537, and target 0.5771 support next. Nevertheless, break of 0.6138 minor resistance will neutralize immediate bearishness, and bring recovery first.




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