The New Zealand Dollar leads to the weakening of commodity currencies in trading on Tuesday (21 / April). NZD / USD entered the beginning of the European session with a record of weakening more than 0.7 percent in the range of 0.5990s. Although the New Zealand government has announced it will ease lockdowns starting next week, poor commodity price expectations continue to put pressure on the Kiwi.

New Zealand is one of the developed countries that implemented the earliest national lockdown, precisely since almost a month ago. The policy is considered successful in reducing the number of cases of Coronavirus infection (COVID-19) in the range of one digit per day, and helping health services ensure the recovery of victims.

Until now, New Zealand has only recorded 1445 COVID-19 cases with 13 people dead and 1006 recovering. In line with this success, PM Jacinda Ardern announced it would relax lockdown rules and normalize economic activity starting next Monday.

Some parties are concerned that lockdown easing will trigger a second wave of outbreaks, but this step is needed to mitigate the negative impact of lockdowns on the economy.

New Zealand Inflation and Strengthening Alignment of USD

"The stakes are very high. Moving to Alert Level 3 will provide short-term benefits for sentiment and economic activity, but economic damage will be greater - and longer - if we have to return to Alert Level 4 (national lockdown that took place earlier), "said Sharon Zollner, ANZ Chief Economist.

Meanwhile, market participants are still highlighting the turmoil of global risk sentiments that have pressured stock exchanges, commodities, and other high-risk assets. As long as market sentiment has not fully recovered, the New Zealand Dollar exchange rate has a gloomy outlook.

"NZD / USD faces downside risks this week if the USD strengthens in line with our expectations. A global recession, low commodity prices, and an increasing current account deficit are all strong winds for NZD," said Joseph Capurso of the Commonwealth Bank of Australia ( CBA).

Yesterday's release of New Zealand inflation data was satisfactory. However, this data has almost no effect on the exchange rate, due to the loss of relevance of inflation data in the current crisis. The New Zealand central bank has cut its interest rates and poured out Quantitative Easing, and has no plans to tighten monetary policy despite rising inflation.

On Monday (20 / April), the New Zealand Statistics Department released first-quarter inflation data that rose 2.5 percent on an annual basis (Year-over-Year), higher than economists' forecasts for growth of 2.1 percent, and better than the 1.9 percent increase in the previous quarter. Historically, this year's annual inflation rate was the highest since the third quarter of 2011.

Corona Virus in New Zealand Cause Increase in NZD Inflation

New Zealand inflation every quarter increased from 0.5 percent to 0.8 percent, breaking expectations for just 0.4 percent growth. A significant surge in inflation occurred due to rising prices of domestic goods which were above 3 percent, especially for cigarette prices and property rental costs.

The true pandemic only spread to New Zealand at the end of the first quarter, so that it did not greatly affect the inflation calculation that was calculated in 3 months. "New Zealand CPI data is calculated every quarterly period and not all data is collected every week.

This means some parts of the first quarter inflation data did not fully capture price movements caused by COVID-19, "said NZ Statistics Senior Manager Paul Pascoe.

Pascoe added that the New Zealand government's steps to slow down COVID-19 by closing down non-essential businesses and ordering people to stay at home since March 25 did not significantly affect inflation data collection. The reason is, only the last week of March requires an alternative approach to collecting food and fuel prices weekly.

As a commodity currency, the NZ Dollar is still influenced by various sentiments, such as market concerns over the spread of COVID-19 and hopes of China's economic recovery after implementing a lockdown step in February.