New Zealand CPI rose 0.7% qoq in Q3, turned positive from Q2’s -0.5% qoq, but missed expectation of 0.9% qoq. Annually, CPI slowed to 1.4% yoy, down from Q2’s 1.5% yoy, missed expectation of 1.7% yoy. Separately released, RBNZ core CPI based on sectoral factor model was unchanged at 1.7% yoy.

The inflation readings are substantially below RBNZ’s own forecast of 1.1% qoq and 1.8% yoy as presented in the August MPS. While the economy appeared to be rebounding well from pandemic slump, risks to inflation outlook are clearly to the downside. As inflation is expected to slow further ahead, the case for more RBNZ easing continues to build up. It’s just a matter of time when negative rates will be adopted.

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Full CPI release here.

NZD/USD continues to gyrate around 55 day EMA for now and upside momentum for rebound has been limited. Price actions from 0.6511 are more likely forming the second leg of the pattern from 0.6797 high. That is, we’d expect the corrective fall from 0.6797 to resume sooner or later to 38.2% retracement from 0.5469 at 0.6290, sooner or later.

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