- The NZD/USD falls about 0.5900 while the US dollar capitalizes the optimistic data of the US PMI of the US Global for May.
- The PMI composed of the US increased to 52.1 from 50.6 in April.
- The Trump fiscal bill is expected to accelerate fiscal imbalances.
The NZD/USD torque falls near the round level of 0.5900 during negotiation hours in North America on Thursday. The Kiwi torque collapses after the publication of the data of the United States Purchase Management Index (USA) for May, which were stronger than projected.
The PMI report showed that the general business activity in the private sector expanded at a robust rhythm, with a significant increase in production both in the manufacturing and services sectors. The compound PMI was significantly higher in 52.1 from 50.6 in April.
The optimistic data of the US PMIs led to an acute increase in the demand of the US dollar (USD), with the US dollar index (DXY) by rising about 99.90.
Meanwhile, the perspective of the US dollar remains uncertain, since the approval of the new fiscal bill of President Donald Trump in the House of Representatives is expected to climb tax imbalances.
In the Kiwi front, the New Zealand trade balance (NZ) data for April have been surprisingly stronger than projected. In the month, the commercial surplus stood at 1,430 million dollars of New Zealand (NZD), exceeding 794 million NZD and estimates of 500 million NZD.
The NZD/USD is consolidated in a narrow range between 0.5860 and 0.5968 for more than a week. The torque ranges around the 20 -day EMA, indicating a lateral trend.
The 14-day relative force (RSI) index oscillates within the range of 40.00-60.00, which suggests an acute volatility contraction.
A downward movement towards the maximum of April 4, 0.5803 and the minimum of April 11, 0.5730 would be feasible if the PAR extends its decline below the 200 days of 0.5860.
In an alternative scenario, an upward movement towards the minimum of October 9, 0.6052 and the round level of 0.6100 can be considered whether the torque breaks above the psychological level of 0.6000.
GRAPH DIARY NZD/USD
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
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.
