NZD drifting ahead of Business Confidence

The New Zealand dollar continues to drift on Monday, after a quiet week. Currently, NZD/USD is trading at 0.7030, unchanged on the day.

Investors eye New Zealand Business Confidence

The well-respected NZIER Business Confidence, released each quarter, will be released later on Monday (tentative). The indicator declined by -70% in Q1 of 2020, at the height of the Covid-pandemic which shut down much of the New Zealand economy. Since then, Business Confidence has improved, reaching -6% in Q4. A reading in positive territory in Q1 could raise risk sentiment and boost the currency.

Will Fed rethink its dovish stance after CPI?

US inflation, which has hovered at low levels for years, has been a central focus for the market over the past several months, as an improving economy has raised expectations for higher inflation. On Friday, the US released the March Producer Price Index, which measures inflation at a wholesale level. Both the headline and core readings accelerated in March and beat the forecast. Headline inflation rose 1% MoM and 4.2% YoY  – the latter to its highest level since September 2011. Core PPI, which excludes food and energy prices, climbed 0.7% MoM and 3.1% YoY. The annual rate matched a high last seen in February 2o11.

Consumer inflation will be released on Tuesday (12:30 GMT). The releases will be closely watched, especially after the impressive PPI data. If CPI is also stronger than expected, that could force the Federal Reserve to re-evaluate its pledge not to raise rates prior to 2024. The Fed has no plans to taper its QE programme, but rising inflation could lead the Fed to reconsider reducing QE if it is concerned that the economy could overheat if it doesn’t take action.

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NZD/USD Technical

• NZD/USD is facing resistance at 0.7071. This is followed by resistance at 0.7107
• There is support at 0.6998. Close by, there is support at 0.6961

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