Currency talk: Muted currency reaction after CPI data

NZForex's Alex Hill and NBR's Jason Walls break down the latest currency news on NBR Radio. With special feature audio.

Yesterday’s slightly ahead of the market’s forecast consumer price index data did little to move the stubbornly high kiwi dollar against the US dollar.  

After dropping half a cent against the greenback, the kiwi recovered to the same level it was trading at before the consumer price index (CPI) data was released, sitting at just above 69c.

NZForex corporate finance head Alex Hill says the market reaction to the data was fairly muted.

The CPI rose 0.2% for the March quarter, slightly ahead of expectations and annual inflation rose to 0.4%, from 0.1%.

Mr Hill says when it comes to CPI figures, the most important thing to look at is whether it changed market pricing for a movement in the official cash rate (OCR).

In this case, it did not, Mr Hill says.

“The market is still pricing in a 28% chance of a rate cut from the Reserve Bank in April, a 76% chance of a cut in June and 100% chance there will be a 25 basis point cut by August.”

Although the CPI was up 0.2% for the quarter, the biggest component was a 9.4% increase in excise levies on tobacco products.

NBR’s Rob Hosking pointed out that when this is taken out, the CPI is negative 0.1% for the quarter and increased just 0.2% annually. 

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