New Zealand dollar extends losses

The New Zealand dollar remains under pressure, as NZD/USD is having a dreadful week, down 2.47%. In the North American session, NZD/USD is trading at 0.5950, down 0.27%.

NZ Manufacturing PMI surprises to the upside

It has been a solid week for New Zealand data, but that hasn’t helped the New Zealand dollar, which has fallen to its lowest level since May 2020. Earlier today, New Zealand’s manufacturing PMI for August improved to 54.9, up from 53.5 in July and above the consensus of 52.5. This marked the highest level since July 2021 and manufacturing has now expanded for a fifth month running, with readings above the neutral 50.0 level. This is in contrast to global manufacturing, which has been struggling and slowed to 50.3 in August, down from 51.1 in July.

Earlier in the week, New Zealand posted a stronger-than-expected GDP report for Q2. The economy climbed 1.7%, reversing the 0.2% decline in the first quarter. The upswing in growth was driven by the government’s easing of Covid restrictions. The gain in GDP removed any fear of a technical recession, which is defined as two consecutive quarters of negative growth.

Now that New Zealand’s economy is flexing its muscles, what does that mean for the Reserve Bank of New Zealand? The central bank was almost spot on with its GDP forecast at the August meeting, predicting a gain of 1.8%. At the meeting, the Bank projected that the cash rate would peak at 4.1% in mid-2023. The GDP release is not expected to change that stance, with the Bank likely to raise rates by 50bp in the October and November meetings, which would bring the cash rate to an even 4.0%.

With central banks raising interest rates in order to combat inflation, the World Bank has warned that the global economy may tip into a recession. The World Bank report noted that the three largest economies, the US, China and the eurozone were all slowing sharply, and even a “moderate hit to the global economy” could result in a global recession.

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NZD/USD Technical

  • NZD/USD is testing resistance at 0.6017. Next, there is resistance at 0.6085
  • There is support at 0.5929 and 0.5861

This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

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

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