NZ dollar rises ahead of Manufacturing PMI

The New Zealand dollar has made gains on Thursday. NZD/USD is up 0.33% on the day, trading at 0.6024 in the North American session at the time of writing.

New Zealand manufacturing has been in the doldrums and the April manufacturing PMI, which will be released on Friday, is expected to show contraction, with a forecast of 48.5. The 50 level separates expansion from contraction. The PMI has been in contraction territory for 13 consecutive months, as manufacturing remains in a prolonged slump. In March, activity slowed to 47.1, down from 49.3 a month earlier.

The Reserve Bank of New Zealand has kept the cash rate unchanged at 5.5% since July 2023. The central bank has been cautious about lowering rates even though households and businesses are chafing under the weight of high rates. At the April meeting, the RBNZ said it would maintain a restrictive monetary policy until CPI returned to the 1-3% target range, which it expected to reach by the end of 2024. The central bank meets next on May 22 and is expected to maintain rates.

The Federal Reserve has put the brakes on plans to lower rates as inflation as proved stickier than expected. Boston Fed president Susan Collins said on Wednesday that inflation will take more time to fall than expected and added “there is no pre-set path for policy”.

Earlier this week, New York Fed President John Williams said that “policy is in a very good place” and Minneapolis Fed President Neel Kahskari said rates would need to stay at current levels for an “extended period” and warned that the Fed could hike rates if inflation stalled around 3%. The Fed has been pouring cold water on rate cut expectations, although the markets still expect two rate cuts before the end of the year.

NZD/USD Technical

• NZD/USD has pushed above resistance at 0.6014 and is testing resistance at 0.6023
• 0.5997 and 0.5988 are providing support

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