Foreign exchange traders’ positive reaction indicate that not only NZD is strong and resilient, but also New Zealand economy is also resilient.
The NZD/USD was higher on Wednesday as forex traders reacted to the comparatively stronger New Zealand consumer inflation data. The pair is trading at 0.7185, which is somewhat above this week’s low at 0.7158.
Some of the factors that contributed include the NZ’s effective response to the pandemic as well as better economic performance. . The country suffered just 25 people and that made NZ’s response one of the best in the world. At the same time, the economy also performed moderately better than other related countries like Australia and the UK.
Impressive inflation numbers
This recovery is gaining momentum which is reflected by the first quarter inflation numbers. According to Statistics New Zealand, the headline consumer price index increased from 0.5% in the fourth quarter of 2020 to 0.8% in the first quarter. This was better than the median estimate of 0.7% and led to a year-on-year surge of 1.5% and was far better than the previous 1.4%.
According to the statistics bureau, this increase was due to the transportation sector that recorded a price increased by 3.9% and was the biggest quarterly increase in more than 10 years. In addition, the price of petrol rose by 7.2%, the sharpest increase in more than 5 years. This was chiefly due to the recent hike in crude oil prices.
Other contributory factors to New Zealand inflation were housing costs, new and used cars, and mortgages. Electronics and furniture prices were low.
It is noteworthy that the headline and core consumer prices are still below the target of the Reserve Bank of New Zealand (RBNZ) of 2.0%. However, the trend will likely continue as the country recovers. Some sectors like hotels and tourism destinations will also record robust prices as the country starts to reopen its borders.
The strong New Zealand inflation is a positive sign for the NZD/USD pair as it could influence the RBNZ to turn aggressive.
The NZD/USD pair is bouncing back following the latest New Zealand inflation numbers.
All the indications signal a speedy recovery of COVID-hit New Zealand economy. Time is ripe for the prospective investors to enter the NZ economy.
