CPI - Market Update: New Zealand's Q3 inflation fell below expectations

New Zealand's third quarter inflation fell below expectations, leading to a short-term weakening of the New Zealand dollar as the downward trend persisted.

The New Zealand Dollar showed signs of cautious weakening following the release of local inflation data. In the third quarter, New Zealand's Consumer Price Index (CPI) increased by 5.6% year-on-year, falling short of the expected 5.9% growth. Additionally, the quarter-on-quarter local headline inflation of 1.8% was slightly lower than the anticipated 1.9%.

Source: Investing.com

This data suggests a milder-than-expected inflation report, which holds significant implications for the Reserve Bank of New Zealand (RBNZ). The RBNZ adjusts interest rates to influence inflation and economic growth, so this CPI data may prompt the central bank to approach its policy with more caution than previously expected.

Consequently, the data has cooled expectations for further monetary tightening and perhaps opening the door to a shorter period for higher interest rates. This adjustment in expectations has contributed to the New Zealand Dollar's decline after the CPI report. Given these factors, the Kiwi Dollar could be vulnerable in the short term, let us look at how price action is shaping up.