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15/07/24
189
NZD Lower After Soft Services PMI
On Monday, the New Zealand dollar began the week in negative territory and NZD/USD traded at about 0.6097, 0.35% lower for the day in the European session.
The week began on a grim note in New Zealand as the June Services PMI dropped to 40.2 from 42.6 in May, decelerating for the fourth consecutive month and missing expectations. The new orders and employment sub-categories posted multi-year lows.
This reading was the softest reading since May 2020. The weak reading came after the Manufacturing PMI last week, which also decelerated, falling to 41.1 in June from 47.2. The PMI reports present a grim picture of the New Zealand economy, with manufacturing and services both deep in contraction.
At last week’s meeting, the Reserve Bank of New Zealand’s dovish commentary wasn’t anticipated. The central bank kept rates at 5.5% for the 8th consecutive time but opened the possibility of rate cuts if inflation eased as expected. This was a drastic move from the meeting in May when the RBNZ mentioned the possibility of a rate hike.
New Zealand depends on trade with China heavily and the lengthy Chinese economic slowdown may put a dent in New Zealand’s exports. China’s GDP dropped from 5.3% to 4.7% y/y in Q2, and shy of the 5.1% market estimate.
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