The New Zealand dollar (NZD) started the trading week on a negative note, with NZD/USD trading at 0.6097 in the European session, down 0.35% for the day.
One reason for the decline was the Services PMI report, which showed a decrease to 40.2 in June from 42.6 in May. This was below expectations and marked the fourth consecutive month of deceleration. Employment and new orders also hit multi-year lows in the report.
The weak reading was the lowest since May 2020 when New Zealand was dealing with the Covid-19 pandemic. This followed a similar trend in the Manufacturing PMI report, which fell from 47.2 to 41.1 in June.
The Reserve Bank of New Zealand surprised markets last week with dovish commentary, hinting at possible rate cuts if inflation slows as predicted. This was a shift from the previous meeting in May when a rate hike was discussed.
New Zealand’s economy heavily relies on trade with China, but China’s economic slowdown could impact New Zealand’s export sector. China’s GDP growth fell to 4.7% year-on-year in the second quarter, below market estimates of 5.1%.
In terms of technical analysis, NZD/USD is testing support at 0.6107, with further support at 0.6088. Resistance levels are at 0.6138 and 0.6157.
Overall, the PMI reports paint a challenging picture for the New Zealand economy, with both services and manufacturing sectors in contraction mode.