NZD/USD Remains Under Selling Pressure Around 0.6100 Despite Dollar Rebound

NZD/USD extended its decline to around 0.6110 in early Asian trading on Monday. In the absence of a catalyst, the NZD became the weakest currency of the trading day. Meanwhile, a stronger USD following the release of positive US Purchasing Managers Index (PMI) data could temporarily weigh on NZD/USD.

Data released by Statistics New Zealand on Monday showed that New Zealand’s trade account was -NZ$10.05 billion in December May, compared with -NZ$10.22 billion in the previous month. In addition, exports rose from NZ$6.31 billion to NZ$7.16 billion in the same month, while imports rose from NZ$6.32 billion to NZ$6.95 billion in May.

At its latest policy meeting in May, the Reserve Bank of New Zealand predicted that the central bank would not start cutting the official cash rate from 5.5% until the third quarter of next year. Nonetheless, many analysts expect the rate cuts to start in early 2025.

A Standard & Poor’s survey released on Friday showed that US business activity expanded at the fastest pace in more than two years in June. The S&P Composite PMI climbed to 54.6 in June from a final reading of 54.5 in May. The manufacturing PMI rose to 51.7 in June from 51.3 in May, above the expected reading of 51. The services PMI rose to 55.1 in June from 54.8 last month, above the expected reading of 53.7. The dollar rose following the strength in the US PMI.

Meanwhile, Federal Reserve (Fed) officials remain cautious on interest rate policy, stressing that the central bank needs to see more progress on inflation before considering a rate cut. The CME FedWatch tool shows that the market continues to see a near 65% chance of a rate cut in September. The narrative of “higher interest rates for longer” in the US continues to support the USD/NZD in the short term.

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