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NZD Drops on Weak CPI

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The NZD fell sharply yesterday after the quarterly CPI figure missed expectations. Economists had forecast a 0.5% quarterly increase in the index, however the data showed a weaker 0.3% rise. The annual change was also weak at 1%.

The Kiwi dollar declined by over one cent after the release, touching as low as 0.7795 against the US Dollar. This morning’s trade Balance figure also showed a deterioration, however that was on the back of an increase in both Imports and Exports; the trade balance was -1.35 Billion against an expected -0.620 Billion.

PMI’s released yesterday were broadly positive, with Chinese HSBC Flash Manufacturing PMI announced at 50.4 on expectations of 50.2 – the Australian Dollar rose half a cent in the following hours, but later erased all gains. European PMI’s were likewise quite strong with German Manufacturing showing a reading of 51.8 on a forecast of 49.6; this was also reflected in the Euro wide figure which showed expansion at 50.7 against expectations of 50.0. The Euro rallied half a cent on the news.

Still to come tonight will be the release of UK Preliminary GDP (11:30 server time). The figure is expected to show quarterly growth of 0.7%. The Pound sits at 1.6040 after recovering from losses yesterday due to the release of dovish minutes of the MPC meeting.

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