The NZD/USD pair edged lower as the Business NZ Performance of Services Index (PSI) dropped to 40.2 in June, marking its fourth consecutive monthly decrease. This decline brought the pair close to 0.6100 during the Asian session on Monday, reflecting the lowest activity level for a month without a COVID lockdown.
Kelly Eckhold, Chief Economist at Westpac, highlighted the Reserve Bank of New Zealand’s (RBNZ) downgraded growth projections and increasing concerns about annual inflation falling below 3%. Eckhold anticipates the RBNZ to begin easing policy in February 2025, with the possibility of an earlier move depending on incoming data.
In China, New Zealand’s top trading partner, Q2 GDP figures are expected to show a slowdown due to internal and external challenges. The Communist Party of China’s Third Plenum meeting, starting today, could determine the country’s long-term economic direction.
The US Dollar strengthened following the attempted assassination of former US President Donald Trump on Saturday, leading to improved risk aversion. Analysts suggest that this incident could boost Trump’s election prospects, resulting in ‘Trump-victory trades’ such as a stronger US Dollar and steeper US Treasury yield curve.
Despite hotter-than-expected US Producer Price Index (PPI) figures on Friday, the USD remained largely unaffected. The Core PPI rose 3.0% year-over-year in June, exceeding expectations. Additionally, the preliminary Michigan Consumer Sentiment Index fell short of forecasts in July.
Overall, the NZD/USD pair faces pressure from the US Dollar’s recovery and market dynamics influenced by economic data releases and geopolitical events.