New Zealand is about to release its quarterly CPI report soon!
Softer inflationary pressures are eyed, so this might mean a potential shift in the RBNZ’s policy bias.
What might this mean for the ongoing trend on EUR/NZD?
Before moving on, ICYMI, yesterday’s watchlist checked out AUD/USD’s potential trend reversal on risk-off flows. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Chinese government reportedly considering a stock stimulus package on top of a 1 trillion yuan fiscal stimulus plan
BusinessNZ services index fell from 51.1 to 48.8 in December to reflect a return to industry contraction
Australia’s NAB business confidence index improved from -8 to -1 in December thanks to a recovery in retail confidence
Bank of Japan kept interest rates at negative territory and maintained yield curve control targets as expected
In their quarterly update to its “Outlook for Economic Activity and Prices” report, BOJ officials lowered their 2024 median core CPI forecast from 2.8% in the October report to 2.4% this time
During the presser, BOJ head Ueda expressed confidence in achieving inflation targets and noted that more firms are likely to agree to wage hikes in April
Price Action News
After a downbeat performance spurred by risk-off flows and the lack of PBOC action in the previous day, AUD and other risk assets pulled higher in the early Asian trading session.
The main catalyst for the move is seen to be China’s plans to unveil a 1 trillion yuan fiscal stimulus plan, as well as a similar-sized bond package, aimed at supporting the economy and shoring up the Chinese stock market.
However, the biggest mover for the day was the Japanese yen, as the BOJ decision and presser initially sparked a selloff then a rally.
While the central bank kept policy on hold as widely expected, head honcho Ueda’s remarks during the presser signaled a more optimistic inflation outlook and positive expectations for the April wage negotiations.
Upcoming Potential Catalysts on the Economic Calendar:
Eurozone consumer confidence index at 3:00 pm GMTU.S. Richmond manufacturing index at 1:30 pm GMTNew Zealand quarterly CPI at 9:45 pm GMTAustralia’s flash manufacturing and services PMIs at 10:00 pm GMT
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A bit of risk appetite returned to the markets early today when China announced that it is considering a 1 trillion yuan fiscal stimulus package.
Now this could contradict haters who had been saying that China isn’t doing much to boost its economy!
To top it off, Chinese authorities are also reportedly looking into a similar-sized special bond package to help lift its falling stock market.
However, until ACTUAL measures are announced, investors might still have some doubts on how this could potentially impact global growth trends.
With that, EUR/NZD might still have a shot at resuming its climb, especially if New Zealand’s inflation report disappoints. If the Q4 2023 CPI falls short, speculations about an RBNZ shift to a cautious stance could weigh on the Kiwi.
In that case, EUR/NZD could bounce off current levels near the pivot point (1.7860) and 50% Fib, then set its sights back on the bullish targets at the swing high near R1 (1.7940).
Sustained bullish momentum could even lift the pair to fresh highs at R2 (1.8020) just past the 1.8000 major psychological mark.
On the flip side, strong CPI figures from New Zealand could be enough to keep the RBNZ on hawkish footing, contrary to most of its major central bank peers. If so, a break below the trend line and 200 SMA dynamic inflection point could pave the way for EUR/NZD’s slide to S1 (1.7800) or even S2 (1.7700).
Don’t forget that France and Germany are also gearing up to print their flash manufacturing and services PMIs in the next London session, so upbeat results could spark gains for the shared currency.