Date: 16 Jul 2018

New Zealand CPI data will be released at 2345h UK time tonight, with a consensus expectation of a 1.6 per cent rise for Q2 2018 as comapred to Q1. However, US firm Morgan Stanley, writing Monday, is looking for 1.9 per cent increase which, if seen, might give NZD bulls something of a boost, particularly given the evidence of last Friday’s Commodity Futures Trading Commission data that showed a sizeable and increased short NZD position which, the price action might suggest, is unlikely to have been unpicked since the data was collated on July 10. Of course, even for those traders who might feel the risk-reward through New Zealand CPI favours a long kiwi position, there’s the question of which other currency to pair it against. Given that the latest China industrial production (IP) figure underwhelmed (6.0  per cent in June year-on-year, compared to a consensus expectation of a 6.5 per cent rise), perhaps traders might be tempted to look across the Tasman Sea from New Zealand to Australia. Given Australia’s export profile a slackening in Chinese IP might be a drag on the AUD. If New Zealand CPI is to surprise on the topside, perhaps traders might feel that a way to be ready for that eventuality could be through AUDNZD.

Written by Neal Kimberley, External Currency Analyst.