New Zealand CPI lower than expected, New Zealand dollar under pressure

[Redator]

The New Zealand dollar is almost unchanged on Monday. In the North American session, NZD/USD is trading at 0.5980, up 0.08% on the day. Earlier, NZD/USD dropped to a low of 0.5938, down 0.50%, before recovering.

New Zealand inflation rises 2.7%

New Zealand's inflation rate rose to 2.7% y/y in the second quarter, up from 2.5% in Q1 but below the consensus of 2.8%. Electricity prices rose sharply, while gasoline prices fell. On a quarterly basis, CPI rose 0.5% in Q2, down from 0.9% in Q1 and shy of the consensus of 0.6%.

Today's mixed inflation report will be thoroughly dissected by the Reserve Bank of New Zealand which wants to provide relief to the economy with further interest rate cuts. The Bank won't be pleased that annual inflation moved higher but will be encouraged by the decline in quarterly inflation. This marks the fourth straight quarter that CPI has remained within the Bank's target band of 1%-3%.

The RBNZ maintained the cash rate of 3.25% at its meeting earlier this month, ending a streak of six consecutive rate cuts. Still, the Bank's monetary statement was dovish, saying that the RBNZ expected to lower rates further if inflation continued to ease as projected.

There is a strong likelihood that the RBNZ will cut rates at the August 20 meeting ,but much will depend on the health of the domestic economy and the global trade picture. It is tricky for the RBNZ to provide guidance when US President Trump is threatening new rounds of tariffs against key US trading partners, including China, Japan and South Korea. New Zealand has gotten away relatively lightly with only 10% tariffs, but the export-reliant economy will be hurt if the US does slap new tariffs on these countries.

NZD/USD Technical

• There is resistance at 0.5996 and 0.6030
• 0.5957 and 0.5923 are the support levels

NZDUSD 1-Day Chart, July 21, 2025

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