NZD/USD retreats after earlier gains amid weak manufacturing data and dovish RBNZ outlook
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Daily Currency Update
The NZD/USD pair retreated during early European trading on Friday, slipping to around 0.5960 after gaining roughly 1% over the previous two sessions. The New Zealand dollar’s recent rally lost steam as market focus shifted to disappointing domestic data and a cautious outlook from the Reserve Bank of New Zealand (RBNZ). The pair’s decline follows the release of the Business NZ Performance of Manufacturing Index (PMI), which fell to 49.9 in August, down from 52.8 in July. This reading marks the manufacturing sector’s first dip below the neutral 50-level since mid-2023, signaling contraction after months of tentative recovery. The data underscores that New Zealand’s manufacturing industry continues to grapple with the aftermath of a prolonged downturn experienced throughout 2023 and into 2024. Persistent challenges such as supply chain disruptions, weakening demand, and cost pressures appear to be weighing on the sector’s performance. In addition to the soft manufacturing figures, the New Zealand dollar faces headwinds from a dovish policy outlook signaled by the RBNZ. On Thursday, RBNZ Governor Christian Hawkesby reaffirmed expectations for an additional 50 basis points reduction in the Official Cash Rate (OCR) by the end of the year. Hawkesby emphasized that the central bank’s decisions will remain data-dependent, reflecting an ongoing balancing act between supporting growth and containing inflation risks. The dovish stance, combined with lackluster economic data, is likely to temper any near-term upside for the NZD. Market participants will closely monitor upcoming economic releases and RBNZ communications for further clues on the pace and magnitude of future rate cuts. Looking ahead, the New Zealand dollar’s trajectory will depend heavily on whether the domestic economy shows signs of stabilization and whether inflation pressures ease sufficiently to justify a less aggressive easing cycle. For now, the combination of sluggish manufacturing activity and cautious monetary policy signals points to a challenging environment for the NZD in the weeks ahead.Key Movers
The US dollar rebounded modestly from earlier lows on Friday but continues to face resistance near the 98.00 level, keeping price action confined within the previous day’s range. This sideways movement preserves the broader bearish trend that has dominated recent sessions, as market participants weigh mixed economic signals and await further direction. Friday’s inflation report for August showed a slightly hotter-than-expected headline Consumer Price Index (CPI) reading, rising 0.4% month-over-month versus the consensus forecast of 0.3%. The core CPI, which excludes volatile food and energy prices, came in line with expectations at 0.3% m/m. On an annual basis, headline CPI increased 2.9%, marginally exceeding the consensus estimate of 2.8%. These figures suggest that inflation pressures remain persistent but contained, complicating the Federal Reserve’s outlook. However, the labor market data delivered a more notable surprise. Initial unemployment claims surged to 263,000 last week, well above the forecasted 235,000. This uptick reinforces signs of a cooling US jobs market following last week’s disappointing Nonfarm Payrolls report, which showed weaker-than-expected employment growth. The rise in claims highlights potential softening in labor demand, adding nuance to the inflation story and fueling speculation about the Fed’s next moves. Together, the inflation and labor data create a complex backdrop for the US dollar. While inflation remains stubborn enough to discourage aggressive easing by the Fed, the weakening jobs market signals a possible slowdown in economic momentum. As a result, traders appear cautious, limiting the dollar’s upside and keeping it range-bound for now. Looking ahead, market participants will closely monitor upcoming economic releases and Federal Reserve commentary for clearer signals on monetary policy direction. Until then, the US dollar’s movement is likely to remain constrained below key resistance levels, with the broader bearish trend intact amid lingering uncertainties.Expected Ranges
- NZD/USD: 0.5850 - 0.6050 ▲
- NZD/EUR: 0.4950 - 0.5150 ▲
- GBP/NZD: 2.2700 - 2.2900 ▼
- NZD/AUD: 1.1000 - 1.1200 ▼
- NZD/CAD: 0.8100 - 0.8300 ▲