- The NZD/USD wins traction to around 0.6035 in the early Asian session on Thursday.
- The US ISM Services PMI contracted unexpectedly in May, the first time in almost a year.
- The RBNZ could slow the pace of feat cuts as uncertainty grows.
The NZD/USD extends the rebound to around 0.6035 during the Early Asian Session on Thursday. The US dollar (USD) weakens against the New Zealand dollar (NZD) due to the concern about the growing economic and political uncertainty in the US economy. Investors expect the PMI of Caixin Services of China, which will be published later on Thursday.
The economic data of the US weakest than expected published on Wednesday exert some sale pressure on the dollar and create a tail wind for the torque. The data published by the Supply Management Institute (ISM) revealed that the US Puro) Purchase Management Index (PMI) of US services fell to 49.9 compared to 51.6 above. This reading was weaker than the market expectation of 52.0.
In addition, employment in the US private sector according to ADP increased by 37,000 in May, compared to an increase of 60,000 (reviewed from 62,000) registered in April, which was well below the expectation of the market of 115,000.
The expectation that the New Zealand Reserve Bank (RBNZ) slows the rhythm of interest rate cuts as uncertainty grows could provide some support to the Kiwi. “While the RBNZ degraded its economic forecasts compared to February and emphasized the high degree of uncertainty around global conditions, there was a surprising amount of caution around the moment and the extension of future oCR cuts,” said Westpac’s senior economist, Michael Gordon.
Investors will closely monitor developments around commercial conversations between the US and China. The secretary of the US Treasury, Scott Besent, said on Sunday that Trump and Xi Jinping were expected to meet soon to resolve commercial disputes, although on Monday there was a statement from the Ministry of Commerce of China about the accusations of the US that Beijing violated his commercial agreement. Any sign of renewed commercial tensions could undermine Kiwi as Proxy of China, since China is an important commercial partner of New Zealand.
New Zealand Faqs dollar
The New Zealand dollar (NZD), also known as Kiwi, is a well -known currency among investors. Its value is largely determined by the health of the neozyous economy and the policy of the country’s central bank. However, there are some peculiarities that can also make the NZD move. The evolution of the Chinese economy tends to move Kiwi because China is the largest commercial partner in New Zealand. The bad news for the Chinese economy is probably translated into less neozyous exports to the country, which will affect the economy and, therefore, its currency. Another factor that moves the NZD is the prices of dairy products, since the dairy industry is the main export of New Zealand. The high prices of dairy products boost export income, contributing positively to the economy and, therefore, to the NZD.
The New Zealand Reserve Bank (RBNZ) aspires to reach and maintain an inflation rate between 1% and 3% in the medium term, with the aim of keeping it near the midpoint of 2%. To do this, the Bank sets an adequate level of interest rates. When inflation is too high, RBNZ rises interest rates to cool the economy, but the measure will also raise bond performance, increasing the attractiveness of investors to invest in the country and thus boosting the NZD. On the contrary, lower interest rates tend to weaken the NZD. The differential type of types, or how they are or is expected to be the types in New Zealand compared to those set by the Federal Reserve of the US, can also play a key role in the NZD/USD movement.
The publication of macroeconomic data in New Zealand is key to evaluating the status of the economy and can influence the valuation of the New Zealand dollar (NZD). A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and can encourage the New Zealand reserve bank to increase interest rates, if this economic strength is accompanied by high inflation. On the contrary, if the economic data is weak, the NZD is likely to depreciate.
The New Zealand dollar (NZD) tends to strengthen during periods of appetite for risk, or when investors perceive that the general market risks are low and are optimistic about growth. This usually translates into more favorable perspectives for raw materials and the so -called “raw material currencies”, such as Kiwi. On the contrary, the NZD tends to weaken in times of turbulence in markets or economic uncertainty, since investors tend to sell the most risky assets and flee the most stable shelters.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
