New Zealand dollar stabilizes

The New Zealand dollar is headed for its seventh consecutive losing week.  NZD/USD has declined 2.51% this week and the currency is trading at July 2020 lows. The currency plunged 1.01% on Thursday but has steadied on Friday and is trading at 0.6244.

New Zealand’s Manufacturing Index slowed to 51.2 in April, down from 53.8 in March. The reading didn’t have much impact on the New Zealand dollar, which remains under pressure after a sharp drop on Thursday. This marked the lowest level since August 2021, and the index has fallen close to the 50.0 level, which separates contraction from expansion. Manufacturers continue to point to labour shortages and supply chain disruptions as key problems for the sector, along with Covid-19.

The slowdown in manufacturing follows Inflation Expectations for Q2, which accelerated for an eighth straight month. The gain was admittedly small (3.29%, up from 3.27%), but the RBNZ has stated it would act to ensure that soaring CPI does not become embedded into inflation expectations. I expect the RBNZ to continue to raise rates aggressively until inflation expectations show signs of easing, which could take several months. The RBNZ next meets on May 25th and is widely expected to hike rates by 0.50%, which would bring the Official Cash Rate to 2.0%.

Fed’s Powell sticks to 0.50% stance

The Fed has signalled that it plans to deliver 50-bps increases in June and July, but the markets aren’t dismissing the possibility of a massive 0.75% hike, especially after US inflation remained higher than expected in April, at 8.3%. Hopes of an “inflation peak” were dashed, and the Fed’s aggressive stance appears justified in order to wrestle down red-hot inflation. Fed Chair Powell was overwhelmingly confirmed for a second term on Thursday by the US Senate. Powell stuck to the 0.50% script overnight, which has helped soothe market nerves about a 0.75% move.

.

NZD/USD Technical

  • NZD/USD continues to break below support levels as it loses ground. There is support at 0.6169 and 0.6066
  • There is resistance at 0.6281 and 0.6344

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.