- NZD/USD advances towards 0.5894, halting a two-day decline while remaining contained within its established weekly trading range.
- Robust New Zealand Business PMI data and elevated RBNZ inflation forecasts provide tailwinds for the New Zealand Dollar.
- The US Dollar Index (DXY) remains largely unchanged ahead of the release of US consumer sentiment figures, as recent soft US economic data bolsters expectations for Federal Reserve rate reductions.
The NZD/USD pair is exhibiting upward momentum, trading in the vicinity of 0.5894 as the American trading session commences on Friday, thereby interrupting a two-day sequence of losses. The currency pair is maintaining its position within the defined parameters of this week’s trading range, bolstered by positive domestic economic indicators and increasing inflation expectations. From a technical perspective, the 50-day Exponential Moving Average (EMA), situated near the psychological threshold of 0.5850, is providing a robust level of support.
The latest data from New Zealand reveals that the Business NZ Purchasing Managers’ Index (PMI) registered a reading of 53.9 in April, an increase from 53.2 in the preceding month. This indicates continued expansion within the manufacturing sector, suggesting underlying strength in the New Zealand economy. Concurrently, the Reserve Bank of New Zealand’s (RBNZ) quarterly survey of expectations revealed that businesses anticipate an average inflation rate of 2.29% over the next two years, a rise from the 2.06% recorded in the previous quarter. This upward revision in inflation expectations could influence the RBNZ’s monetary policy decisions in the coming months.
While the RBNZ is still broadly anticipated to implement a 25 basis point reduction in the Official Cash Rate (OCR) later this month, the observed increase in inflation expectations may prompt policymakers to adopt a more measured and deliberate approach to future monetary easing. Market participants will be closely monitoring upcoming economic data releases and central bank communications for further clues regarding the trajectory of monetary policy in New Zealand. Furthermore, global risk sentiment and developments in other major economies will continue to play a significant role in shaping the outlook for the NZD/USD exchange rate. The upcoming US consumer sentiment data will be crucial in determining the short-term direction of the US Dollar and, consequently, the NZD/USD pair.
