The NZD/USD currency pair has made a come back on Friday, increasing up to 0.5894, thus stopping at least for two days losses’ streak. The tendency is reinforced by the release of strong positive domestic economic data out from New Zealand. Such growth contradicts the prevailing dour narrative about the US dollar. In particular, the increase in inflation expectations was seen as powerful support for the NZD/USD. This confluence of factors supported it maintaining the bottom of its weekly trading range.
As American trading hours opened up, the NZD/USD moved slightly higher, trading around 0.5894. The recent data releases have provided a solid foundation for the New Zealand dollar, showcasing resilience in the country’s economy despite ongoing global uncertainties.
Upbeat Economic Indicators Boost NZD
Here’s why the most recent Business NZ Purchasing Managers’ Index (PMI) is one of the major forces powering NZD/USD’s recent performance. It soared to 54.9 in April, an increase from 53.2. This uptick indicates continuing growth in the manufacturing industry. It highlights the resilience and flexibility of New Zealand’s economy in face of multiple, recurring adversities.
“We still expect a 25bp OCR cut later this month and a 2.75 percent OCR endpoint, but this is conditional on the expected mid-2025 lift in inflation proving to be transitory.” – ASB Bank senior economist Mark Smith
Increasing inflation expectations further strengthen this optimism. This change might push the Reserve Bank of New Zealand (RBNZ) to adopt a more dovish stance in their future monetary policy decisions. The RBNZ is expected to announce a 25 basis point rate cut later this month, driven by its dual objectives of maintaining price stability and supporting maximum sustainable employment.
Technical Analysis and Market Dynamics
The technical landscape for the NZD/USD indicates that the 50-day Exponential Moving Average (EMA) positioned near the psychological level of 0.5850 offers a robust support floor for the currency pair. This technical indicator has taken on greater importance as traders try to understand price swings amidst major economic news.
Even with today’s advances, the NZD/USD remains contained to this week’s range. This signals that participants in the markets are especially focused on the next slew of real economic releases. On Monday, the Producer Price Index (PPI) comes out. Any of this data doesn’t need to be overwhelmingly positive to have a huge impact on market sentiment and expectations of future monetary policy.
The RBNZ’s economic strategy is aimed at developing and maintaining a price-stable economy. It explicitly aims for an inflation rate of 2%, surely no lower than 1% and no higher than 3%, as measured by the Consumer Price Index (CPI). The central bank’s decisions regarding interest rates will continue to depend on how inflation trends evolve in the coming months.
Upcoming Economic Developments
Focus now moves to a string of important economic data New Zealand releases next week. These reports are expected to provide further insights into the health of the economy and influence monetary policy decisions by the RBNZ.
The upcoming data releases will be absolutely key in determining the course of inflation and the economy’s performance as a whole. If inflation expectations continue to rise, the RBNZ’s policies will come under increased criticism. This would likely lead to second-guessing of any cuts to the Fed’s target interest rate.