NZD/USD: New Zealand Dollar Slips to 1-Year Low on Weak Services PSI
2024.11.18 08:52
The has started the trading week with losses. In the European session, the NZD/USD pair is trading at 0.5837, down 0.50% on the day. This is the New Zealand dollar’s lowest level since November 2023.
New Zealand Services PMI Stuck in Contraction Mode
New Zealand Services inched upwards in October but remains in contraction mode. The reading of 46.0 was higher than the September reading of 45.7 but shy of the forecast of 47.0. Services activity has contracted for eight straight months as the economy continues to sputter. The survey found that the major concerns of respondents were the cost of living and economic conditions.
The Reserve Bank of New Zealand has shown it can be aggressive as it chopped by 50 basis points in October, bringing the cash rate to 4.75%. This move was expected yet the New Zealand dollar still plunged almost 1% in response to the dramatic move.
The RBNZ meets next on Nov. 27 and the markets are expecting more strong medicine in the form of another oversized 50-bp cut to stimulate the economy. This would likely put strong downward pressure on the wobbly New Zealand dollar.
US Retail Sales Stronger Than Expected
The week ended on a positive note as US retail sales were better than expected in October. Monthly, retail sales rose 0.4%, better than the market estimate of 0.3% and following a September gain of 0.8% that was revised from 0.4%. Annually, retail sales posted a strong gain of 2.8%, up from an upwardly revised gain of 1% in September and blowing past the forecast of 1.9%.
The strong data for September and October has lowered the odds of a rate cut in December, which are currently around 60%. On Thursday, prior to the retail sales report, Chair Powell said that “the economy is not sending any signals that we need to be in a hurry to lower rates”.
NZD/USD Technical
- There is resistance at 0.5894 and 0.5948
- 0.5809 and 0.5755 are the next support levels
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