News

New Zealand data, Q1 2025 CPI:

+0.9% q/q

• expected +0.7%, prior +0.5%

+2.5% y/y

• expected +2.3%, prior +2.2%

more to come

Non-Tradeables +1.1% q/q (expected +0.8%) and +4.0% y/y

• tradeables +0.7% q/q (expected +0.8%)

NZD/USD a touch higher after the data:

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“Tradable” and “Non-tradable” inflation are terms used to describe different aspects of inflation based on the nature of the goods and services involved.

1. Tradable Inflation:

   • Definition: Tradable inflation refers to inflation in goods and services that are traded internationally.
   • Examples: Commodities like oil, metals, agricultural products, and manufactured goods like electronics and automobiles.
   • Characteristics: Prices of tradable goods are often influenced by global market conditions, exchange rates, and international supply and demand dynamics. For instance, if the price of oil increases globally, it will lead to tradable inflation in countries that import oil.
   • Impact: The inflation of tradable goods can be significant for countries that rely heavily on imports or exports. Changes in exchange rates can also have a substantial impact on tradable inflation.

2. Non-tradable Inflation:

   • Definition: Non-tradable inflation refers to inflation in goods and services that are not internationally traded.
   • Examples: Services like healthcare, education, and local utilities, as well as goods with high transportation costs relative to their value, or those that are typically consumed where they are produced.
   • Characteristics: Prices of non-tradable goods and services are primarily influenced by domestic factors such as local wage levels, property rents, and domestic policies. These prices tend to be more stable compared to tradable goods, but can vary significantly from country to country.
   • Impact: Non-tradable inflation is more directly controlled by domestic monetary and fiscal policies. It is less subject to external shocks but can be influenced by domestic factors like labor market conditions and local regulatory changes.

In summary, tradable inflation is primarily driven by international factors and market conditions, whereas non-tradable inflation is driven by domestic economic conditions and policies.

This article was written by Eamonn Sheridan at www.forexlive.com.

United States Net Long-Term TIC Flows above expectations ($35.2B) in February: Actual ($112B)

The GBP/JPY pair continued to edge lower on Wednesday, falling toward the 188 zone and marking a daily decline of nearly 0.9%. The cross remains anchored near the bottom of its range between 187.668 and 189.664, reinforcing the weight of recent selling pressure.

USD/JPY price analysis: Dollar struggles amid trade tensions, pair capped below key moving averages

Canceled freight vessel sailings from China are up and will ripple through the supply chain as the trade war impact on the global economy intensifies.

Nvidia said in a statement that its exports help alleviate the U.S. trade deficit.

Here are the forecasts from Deutsche Bank for the years ahead:

Deutsche Bank’s reasoning is as follows.

Key medium-term USD bearish drivers:

• Supportive EU vs. US fiscal stance: thanks to German fiscal policy.
• Valuations: Purchasing power parity in the 1.25-1.30 range acts as medium-term anchor for EUR/USD amid geopolitical uncertainty.
• US asset risk premium & weaponing risk: Persistent global diversification away from USD assets, driven by US economic policy unpredictability and concerns over sanctions.
• US cyclical slowdown: A weaker growth trajectory to achieve medium-term inflation objectives, with added drag from unpredictable policymaking.

Short-term outlook:

• YE-25 forecasts remain conservative.
• The likely dovish ECB reaction function in the near-term will constrain the widening in short-term EU-US interest rate differentials plus broader uncertainty on US policy path in coming months.

Risks:

• A faster US climbdown on aggressive trade policy and a more growth-supportive US budget bill is likely to slow down the dollar downtrend, while a continued erratic shift in trade policy combined with larger than expected fiscal tightening is likely to lead to accelerated dollar downside.

This article was written by Eamonn Sheridan at www.forexlive.com.