NZ Business Confidence Survey Signals Softer Inflation

It was a relatively quiet start to the morning on the Asian economic calendar. However, NZ business confidence figures drew interest.

The ANZ Business Confidence Index slipped from -43.4 to -43.8 in April. Economists forecast an increase to -41.0.

According to the latest ANZ Report,

• Inflation indicators fell further in April, with the Inflation Expectations falling from 5.82% to 5.70%, the lowest since Mar-2022.
• Other inflation components also eased expectations of another hawkish RBNZ rate hike. The Pricing Intentions component fell from 56.8 to 53.7, with the cost expectations component down from 86.4 to 84.2.
• However, wage expectations increased from 83.6 to 87.2.

Following the disappointing trade figures for March, the further deterioration in business confidence would be a red flag for the RBNZ. While inflation expectations softened, the pickup in wage expectations will be a concern.

On April 5, the RBNZ raised the Official Cash Rate (OCR) by 50 basis points to 5.25%. The survey reflected business sentiment toward the RBNZ monetary policy and the current inflation and interest rate environment.

NZD/USD Reaction to NZ Business Confidence Numbers

Ahead of the business confidence figures, the NZD/USD fell to an early low of $0.61141 before rising to a pre-stat high of $0.61248.

However, in response to the business confidence survey, the Kiwi fell to a post-stat low of $0.61197 before rising to a high of $0.61264.

This morning, the Kiwi was up 0.16% to $0.61255.

Next Up

Looking ahead to the US session, it is a busier day on the US economic calendar. Q1 GDP and the weekly jobless claims figures will be in focus.

While bets of a 25-basis point May interest rate hike have eased, the markets expect a May hike. Softer-than-expected US GDP numbers and a spike in jobless claims could test the theory.

US economic indicators have fueled fears of a US economic recession. A shift in sentiment toward the Fed monetary policy outlook could ease expectations of a hard landing.

However, there is no Fed commentary to influence market sentiment. The Fed entered the blackout period on Saturday.

With less the one week until the Fed interest rate decision, the probability of a 25-basis point May interest rate hike rose from 75.8% to 76.2% on Wednesday. Significantly, the chances of a 25-basis point move in June increased from 8.3% to 18.5%, according to the CME FedWatchTool.

Away from the economic calendar, US corporate earnings will also influence market risk sentiment. Big names on the US earnings calendar include Amazon.com (AMZN), Mastercard (MA), Intel (INTC), and Caterpillar (CAT).