- NZD/USD rises to 0.5894, breaking a two -day run streak while staying inside the weekly range.
- A stronger New Zealand business and higher inflation expectations of the RBNZ support the Kiwi.
- DXY is quoted flat before the consumer’s feeling data of the US, since the weak US indicators feed the betting bets of fees of the Fed.
The NZD/USD advances slightly to quote about 0.5894 at the beginning of American negotiation hours on Friday, breaking a two -day run streak. The torque is maintained within this week’s range while obtaining optimistic national data support and increasing inflation expectations. The 50 -day exponential (EMA) mobile average near the psychological level of 0.5850 offers a solid technical support.
The New Zealand Business Manager (PMI) index rose to 53.9 in April from 53.2, reflecting a continuous expansion in the manufacturing sector and offering signs of resilience in the local economy. Meanwhile, the quarterly survey of the New Zealand Reserve Bank (RBNZ) showed that companies now expect inflation to average 2.29% over the next two years, compared to 2.06% in the previous quarter.
Although it is widely expected that the RBNZ makes a rate cut of 25 basic points later this month, the increase in inflation expectations can make those responsible for the policy proceed with more caution in the future.
The senior economist of the ASB Bank, Mark Smith, said that the Central Bank would be “something cautious” given the increase in inflation expectations, adding that recent concerns related to tariffs could further feed the pressures on prices. “We are still waiting for a 25 -PB cut in the OCR later this month and an OCR end point of 2.75 percent, but this is conditional for the expected increase in inflation to mid -2025 to be transitory,” he said.
On the United States side (USA), the US dollar index (DXY) cut previous losses and placed flat around 100.30 on Friday. The US dollar found some support as the hopes of a decrease in tensions between the US and China grew, along with expectations that the Federal Reserve (Fed) could begin to cut interest rates in the coming months.
The US economic data of this week has been mostly weak, with housing beginnings, construction permits and inflation readings (IPC and IPP) all below expectations. Retail sales were also softer than predicted. These impulse deceleration signs have strengthened bets for two feat cuts of the Fed this year. However, a surprising increase in export and import prices added some uncertainty to perspectives.
The preliminary feeling of the consumer of the University of Michigan for May showed that confidence fell sharply to 50.8 from 52.2 in April, well below the expectations of 53.4. The strong fall indicates increasing concerns among American homes and reinforces the need for relief in Fed’s policy in the coming months.
Looking ahead, attention will focus on a series of important publications of economic data in New Zealand next week, starting with the production price index (IPP) on Monday.
RBNZ FAQS
The New Zealand Reserve Bank (RBNZ) is the Central Bank of the country. Its economic objectives are to achieve and maintain the stability of prices – won when inflation, measured by the consumer price index (CPI), falls within the range of between 1% and 3% – and support the maximum sustainable employment.
The Monetary Policy Committee (MPC) of the New Zealand Reserve Bank (RBNZ) decides the appropriate level of the official cash rate (OCR) according to its objectives. When inflation is above the objective, the bank will try to control it by raising its key, making money borrowing for homes and companies and cooling the economy. The highest interest rates are generally positive for the New Zealand dollar (NZD), since they generate greater returns, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the NZD.
Employment is important for the New Zealand Reserve Bank (RBNZ) because an adjusted labor market can feed inflation. The objective of the “maximum sustainable employment” is defined as the greatest use of labor resources that can be maintained over time without creating an acceleration of inflation. “When employment is at its sustainable maximum level, there will be low and stable inflation. However, if employment is above the sustainable maximum level for too long, it will eventually cause prices to increase more and more quickly, which will require the MPC to increase interest rates to maintain inflation under control,” says the Central Bank.
In extreme situations, the New Zealand Reserve Bank (RBNZ) can implement a monetary policy tool called quantitative flexibility. The QE is the process by which the RBNZ prints local currency and uses it to buy assets (generally government or corporate bonds) of banks and other financial institutions with the objective of increasing the internal money supply and stimulating economic activity. The qe generally results in a neo -Zealand dollar (NZD) weaker. The QE is a last resort when it is unlikely that simply lowering interest rates achieve the objectives of the Central Bank. The RBNZ used it during the Covid-19 Pandemia.
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.
