The New Zealand dollar just surged out of nowhere

Ryan Pierse/ GettyAustralia left in New Zealand’s wake again…

The New Zealand dollar is flying, surging against both the US and Australian dollars in recent trade.

Here’s the 5-minute NZD/USD chart.

Investing.com

And the 5-minute AUD/NZD chart.

Investing.com

After showing little reaction to the release of New Zealand’s Q2 CPI report released earlier in the session, a result that saw headline CPI marginally undershoot expectations, the Kiwi has surged in mid-afternoon trade in Asia, finding support from the Reserve Bank of New Zealand’s latest underlying inflation estimate which rose by 1.7% in the year to June, the fastest pace since 2011.

That was higher than the 1.5% increase in headline inflation recorded over the same period, and above the mid-point of the RBNZ’s 1-3% inflation target.

Along with the uptick in underlying inflation, Michael Gordon, Senior Economist at Westpac, said the details of the inflation report were firmer than the headline figure would suggest.

“The non-tradables component of the CPI was peppered with upside surprises,” he said.

“Electricity prices have regained some momentum after a few years of subdued gains, alcohol prices saw an unusually large increase, and accommodation prices saw a surprisingly small decline from their seasonal peak.”

Coupled with thin market conditions ahead of US Fed Chair Jerome Powell’s appearance before the US Senate Banking Committee later today, and with a speculative short positioning in the New Zealand dollar continuing to build, the news has led to an outsized move for the Kiwi that’s also helped to drag the Australian and Canadian dollars along for the rise.

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