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12/07/24
96
NZD Inches Up Despite Soft Manufacturing Data
On Friday, the New Zealand dollar was slightly higher, and NZD/USD traded at about 0.6110, up 0.24% for the day in the European session.
On Wednesday, NZD/USD dropped by 1% after the Reserve Bank of New Zealand’s unusually dovish rate statement surprised the markets. Although the RBNZ kept the cash rate at 5.5% for the 8th straight time, it opened the door for rate cuts sooner than expected, possibly as early as Aug.
The RBNZ projected at the May meeting that rates would stay at 5.5% until August next and even considered a rate hike. The central bank made an unexpected 180-degree pivot at the meeting this week and hinted at possible rate cuts due to expectations for inflationary pressures to ease and the slowing economy.
The markets are now pricing in rate cuts in Aug. or Nov. The increase in rate cut expectations pushed the New Zealand dollar sharply down.
The manufacturing sector in New Zealand has been depressed and in June the Manufacturing PMI dropped deeper into contraction territory. In June, the index slipped to 41.1, down from May’s 47.2 and less than the forecast of 46.8.
Softer demand for New Zealand exports and the weak domestic economy continues to weigh on manufacturing.
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