The New Zealand dollar responded positively to the acceleration in the services sector activity indicator. According to data released by Business NZ last Sunday, the Services Purchasing Managers' Index (PMI) surged to 52.1 in January, up from 48.8 in December, indicating a robust expansion in activity, surpassing the crucial 50-level threshold.
In the face of a weakened US dollar and the absence of American investors in the market on Monday due to Presidents' Day, the NZD/USD pair surged past the significant resistance level of 0.6107. It continued its upward trajectory, reaching approximately 0.61692 at the time of this article's publication.
It's noteworthy that the NZD/USD exchange rate has been on the rise for the fifth consecutive day, demonstrating resilience and attempting to break free from the trading range established over the past few weeks, which fluctuated between 0.6040 and 0.6160.
The New Zealand dollar's strength is further buoyed by other encouraging macroeconomic indicators originating from New Zealand. Additionally, there's an expectation that the country's central bank will likely be one of the last to embark on a monetary policy easing path.
Although the PMI for the New Zealand industry remains in contraction territory, it exhibited a notable improvement in January, climbing to 47.3 from 43.1 compared to the previous month, marking the highest reading since May 2023.
Recent data from the National Statistics Office revealed that the food price index in New Zealand surged by +0.9% in January, hitting its highest level in six months. Rising rents, food prices, and tobacco prices are identified as the primary drivers behind the observed inflationary pressures.
In light of the evolving inflation dynamics and economic growth in New Zealand, some economists are leaning towards the belief that the Reserve Bank of New Zealand (RBNZ) may opt to raise interest rates once again.
While such a decision would be considered "very hawkish," it remains within the realm of possibility. This prospective move is seen as beneficial for the New Zealand dollar (NZD) and the NZD/USD currency pair, particularly in contrast to the Federal Reserve's impending cycle of interest rate cuts.
20.02.2024
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