The USD firmed in the wake of stronger than expected CPI data, sending the kiwi lower. Economists at ANZ doubt the New Zealand dollar can take advantage of RBNZ rate hikes due to high mortgage rates and expected hikes from the Federal Reserve.

Dollar capitalizes on hot inflation report

“The NZD was the second best performer (behind the AUD), but they are both still weaker, with stronger than expected US CPI data casting doubt on the idea that the Fed can remain patient.The NZD’s resilience is pretty understandable given that markets have already come to grips with high NZ CPI and hefty rate hikes are already priced in.”

“The NZD has the potential to respond very positively to the next couple of RBNZ OCR hikes (especially if one of them is 50bps), but as we head into 2022, with mortgage rates already well higher and the Fed then likely eyeing hikes, that timing mismatch could be a real challenge for the NZD. So maybe this isn’t as good as it gets, but it may not be too far off it. Let’s see.”

“Support 0.6860/0.6900 – Resistance 0.7215/0.7310”