The NZD/USD pair rose to nearly 0.6120 as the US Dollar experienced significant selling pressure. This decline in the US Dollar was driven by increasing expectations of a rate cut by the Federal Reserve. The US Dollar Index (DXY) dropped close to the key support level of 104.00, while market sentiment remained positive with strong prospects of a Fed rate cut. The S&P 500 saw notable gains, indicating investors’ risk appetite, while 10-year US Treasury yields fell to around 4.19%.
The CME FedWatch tool showed that rate cuts in September are highly likely, with further cuts expected in the November or December meeting. These expectations were influenced by easing inflationary pressures, as seen in the US Consumer Price Index (CPI) report for June. However, the US Producer Price Index (PPI) rose more than anticipated in June, with annual headline and core PPI accelerating to 2.6% and 3.0%, respectively.
In the Asia-Pacific region, the New Zealand Dollar (NZD) remained weak following disappointing Business NZ PMI data for June. The PMI figure dropped to 41.1 from the previous release of 46.6, signaling a contraction in business activity in New Zealand’s manufacturing sector. This has led to increased expectations of rate cuts by the Reserve Bank of New Zealand (RBNZ).
The Business NZ PMI is a key economic indicator that reflects changes in business activity in New Zealand’s manufacturing sector. A reading above 50 indicates expansion, which is positive for the NZD, while a reading below 50 suggests contraction, bearish for the currency. The latest PMI data, released by Business NZ, showed a decrease to 41.1, highlighting the challenges faced by the New Zealand economy.
Overall, the NZD/USD pair’s upward movement was influenced by the weakening US Dollar and the implications of potential Fed rate cuts, while the Business NZ PMI data indicated challenges in the New Zealand economy, leading to expectations of rate cuts by the RBNZ.