Kiwi CPI Raises Rate Hike Odds

A US holiday kept a lid on trading to start the week so we take a look at the upcoming calendar. The Australian dollar was the top performer in light trading while the US dollar lagged. NZ Q4 CPI rose 0.1% vs expectations of -0.1%. The y/y rate showed a 1.6% rise, vs the expeced 1.5%.

SKY reported that the IMF will raise its growth forecast for the UK to a healthy 2.4% for this year. The pound has tracked mildly lower since the start of the year but the persistent strength in economic data makes it risky to bet against the pound. Rightmove housing data to begin the week underscored the point with home price gains accelerating to 6.3% y/y from 5.4% in Dec.  UK jobless claims, the ILO unemployment rate and the BOE minutes are due this week so risks abound.

The US calendar is very light this week so the focus will remain on earnings. So far, the pattern has been a slump at retailers. Market watchers are questioning whether it's a sign of a slower economy or a shift to online sales.

Another factor to watch is investment. A major theme for 2014 is a pickup in corporate spending, something that can create a virtuous circle of economic growth but on Friday chip making giant Intel announced it will layoff about 5% of its workforce.

Barring a surprisingly soft drop, it's difficult to envision how the numbers could spark a move in the kiwi. Overall, the soft price growth in a strong economy like New Zealand shows the significance of disinflationary forces in the global economy.