The NZD/USD pair has seen a decline in value as softer Inflation Expectations in the second quarter have fueled speculation that the Reserve Bank of New Zealand (RBNZ) may consider lowering rates later in 2024. The Kiwi Business NZ PSI also dropped to 47.1 in April, its lowest level since January 2022. Although the Business NZ Performance of Manufacturing Index (PMI) rose in April, it remained below February’s reading.
The US Dollar Index (DXY) continues to strengthen against major currencies as traders analyze Friday’s economic data from the United States (US) and cautious remarks from Federal Reserve (Fed) officials regarding potential interest rate adjustments. The recent decline in US Treasury yields may limit the Greenback’s upward momentum.
The University of Michigan Consumer Sentiment Index dropped to 67.4 in May, a six-month low, while the UoM 5-year Consumer Inflation Expectation rose to 3.1%, a six-month high. Neel Kashkari, President of the Minneapolis Federal Reserve (Fed), expressed concerns about the tightness of monetary policy but did not completely dismiss the possibility of another rate hike.
Investors will closely watch key US economic indicators this week, including the release of the Producer Price Index (PPI) on Tuesday, followed by reports on the Consumer Price Index (CPI) and Retail Sales on Wednesday. Traders will monitor these data points to gauge the economic outlook and potential market impact.
In conclusion, the NZD/USD pair has depreciated as softer Inflation Expectations and weak business activity in New Zealand have put pressure on the Kiwi Dollar. The US Dollar has strengthened against major currencies, supported by positive economic data and cautious Fed comments. With key US economic indicators on the horizon, investors are preparing for potential market volatility in the coming days.
