NZ dollar slips on soft manufacturing data

The New Zealand dollar is sharply lower on Friday. NZD/USD is down 0.61%, trading at 0.6130 in the European session at the time of writing.

New Zealand manufacturing PMI misses estimate

New Zealand’s manufacturing sector contracted for a 14th straight month in May. The manufacturing PMI fell to 47.2, down from 48.9. New orders have contracted for 21 consecutive months and production decelerated in May. Manufacturers expressed pessimism about New Zealand’s economic slowdown.

The New Zealand economy has been struggling. The past two quarters showed negative growth, indicating a recession, and GDP has contracted in five of the past six quarters. The Reserve Bank of New Zealand is under pressure to lower interest rates which are currently at 5.5% and provide some relief to businesses and households.

The problem for the central bank is that inflationary pressures remain high and are only falling slowly. The consumer price index rose 4.0% y/y in the March quarter, down from 4.7% in Q4 2023 but well above the upper band of the RBNZ’s 1% to 3% target range. The RBNZ meets next on July 10th and is expected to hold rates for an eight consecutive time.

US PPI softer than expected

In the US, producer prices were softer than expected in May. PPI fell by 0.2%, below the April reading of 0.5% and lower than the market estimate of 0.1%. Yearly, PPI ticked lower to 2.2%, down from a revised 2.3% in March and below the market estimate of 2.5%.

The soft PPI data comes on the heel of the May CPI report which also decelerated. The decline in these two inflation reports have raised expectations of a September rate cut, with a 61% of a quarter-point cut currently, compared to 46% just a week ago, according to CME’s FedWatch.

NZD/USD Technical

  • NZD/USD is testing support at 0.6140. Below, there is support at 0.6065
  • 0.6178 and 0.6253 are the next resistance lines

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.