EBC Markets Briefing | New Zealand dollar down on cooling inflation

The New Zealand dollar dipped on Thursday as investors braced for a series of central bank meetings next week. The US has ordered diplomats to depart Saudi Arabia amid Houthi strikes.

New Zealand's annual inflation cooled to 3.7% in Q3, dropping below market expectations but still hovering above the central bank's maximum 3% target limit.

According to Statistics New Zealand, petrol prices remained the primary driver of inflation, despite a slight pullback from the previous quarter. The agency also highlighted a continued rise in residential construction costs.

The RBNZ held its last monetary policy meeting last month. The central bank projects inflation will successfully drop back within its 1% to 3% target band by the first half of 2027.

Markets have fully priced in a 50-bp interest rate increase by late February, alongside a near-certain 98% probability of a hike at next week's central bank meeting.

After a prolonged period of weakness, the economy has begun to show signs of resilience. The ruling party was elected three years ago on a pledge to revive growth, and the next election will hold in November.

EBC Financial Group analyst says the Kiwi is in a transition from bearish sentiment to market accumulation. It is hitting resistance near $0.5700, likely leading to a period of consolidation.

Asset Recap

As of market close on 21 October, among EBC major products, SpaceX shares led gains after earnings beat. Musk said he's considering a combination with Tesla, adding to the risk sentiment.

Netflix shares hit a two-year low after Wall Street analysts lowered their target prices in response to weaker-than-expected fourth-quarter revenue guidance and full-year advertising projections.

Wall Street closed higher, led by the tech-heavy Nasdaq, as strong quarterly results from SpaceX boosted investor appetite for AI-related stocks. However, overall gains were limited by weakness in communication services.

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EBC Financial Group Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Global Financial Collaboration or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.