The New Zealand dollar continued to rise, extending its gains for the fourth day in a row. In North American trading, NZD/USD was trading 0.44% higher at 0.6149.
Services PMI reaches highest level in 8 months
New Zealand’s BusinessNZ Service Performance Index improved to 52.1 in January from 48.8 in December and beat expectations of 49.6. This pushed the index into expansion territory, marking the highest pace of activity since July 2023. A level of 50 separates contraction from expansion. This is welcome news for an economy that has been chilled by the Reserve Bank of New Zealand’s rapid interest rate tightening cycle.
Has the RBNZ finished raising rates? The market thinks so and is pricing in a mid-year rate cut. Central banks have become more cautious and have rebounded against these expectations. The latest salvo was aimed at dampening expectations for a rate cut, after Orr said last week that inflation expectations remain too high. At its last meeting in November, the RBNZ did not rule out the possibility of rate hikes and said it did not expect any rate cuts until mid-2025.
New Zealand’s inflation rate is running at 4.7%, more than double the midpoint of the 1-3% target range. The RBNZ is unlikely to cut interest rates until inflation falls to near 2%, and unless inflation falls dramatically, cutting interest rates by the end of the year seems doubtful. RBNZ’s next meeting will be held on February 28thth Interest rates are expected to remain unchanged for the fifth consecutive time.
NZD/USD Technical
- NZD/USD is putting pressure on the resistance level at 0.6168. In the above, there is resistance at 0.6211.
- 0.6109 and 0.6066 provide support
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