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The NZD/USD jumped on Friday after better-than-expected New Zealand Consumer Price Index data for the second quarter. The pair was trading at 0.70226 which was 0.55% higher than the previous day.

NZD/USD Outlook

New Zealand Inflation Outlook

New Zealand’s annual inflation jumped in June. The Consumer Price Index (CPI) for June 2021 was hovering records high after a 3.3% advance. This was the biggest leap in nearly 10 years where annual inflation spiked 5.3% in June 2011.

The advance in June’s CPI was driven by higher prices for new housing and petrol. Price increases were widespread in all the sectors in the CPI basket compared with a year ago. Part of the annual increase was linked to the fact that it was compared with June 2020 when the prices had declined due to the Covid 19 pandemic.

Quarterly inflation advanced 1.3% surpassing the 0.8% estimate. It was also the highest in over a decade. The cost of building a new house was the biggest boost in both the annual and quarterly inflation in the second quarter. It was up 7.4% for the year and 4.6% for the quarter.

Rent and transport were also key contributors to price increases. Rent prices were up 2.9% for the year and 0.9% for the quarter. Petrol prices increased 16% over the year.

US Economic View

Weekly initial jobless claims in the US fell in the previous week recording a new pandemic-era low. According to the Labor Department, the initial jobless claims declined to 360,000 hitting Dow Jones estimates. This was the best number since March 14, 2020.

The total represented a 26,000 decrease from the previous week’s upwardly revised level of 386,000. Continuing claims took a sharp dive of 126,000 to 3.24 million. This established a new low for the employment market which was still hovering below its pre-pandemic levels.

The NZD/USD pair will react to the US monthly retail sales for June later in the day. According to estimates, the retail sales are expected to decline 0.4% but improve from the previous 1.3% decrease. The core retail sales are expected to jump 0.4% from the previous 0.7% decline.

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