NZD/USD retreats to 0.6060 as US Dollar rebounds, NZ economy falls into a recession
|- NZD/USD falls sharply to 0.6060 as the US Dollar sees a sharp recovery.
- The S&P Global reports that preliminary Manufacturing PMI surprisingly rose to 52.5 in March.
- The Q4 NZ GDP shows that the economy was in a technical recession in the second half of 2023.
The NZD/USD pair surrenders its intraday gains and turns negative in the early New York session on Thursday. The Kiwi asset falls back as the US Dollar rebounds sharply from its five-day low of 0.6060. The US Dollar Index (DXY) rises strongly to 103.76 as the Federal Reserve (Fed) has revised United States Gross Domestic Product (GDP) forecasts higher for 2024.
Fed’s latest economic projections indicate that the US economy will grow by 2.1% in 2024, upwardly revised from December’s projections of 1.4%. An upbeat economic outlook bodes well for the domestic currency.
Meanwhile, the S&P Global has reported mixed preliminary PMI data for March. The agency shows that the Manufacturing PMI surprisingly rose to 52.5 from the former reading of 52.2. Investors anticipated the factory PMI to decline to 51.7. The Services PMI that represents the service sector, which accounts for two-thirds of the economy, falls at a higher pace to 51.7 from expectations of 52.0 and the former reading of 52.3.
The appeal for risk-perceived assets has weakened despite firm market expectations for the Fed to reduce interest rates after the June policy meeting. The CME FedWatch tool shows that there is a little over 74% chance that a rate cut will be announced in June, which is significantly up from the 59% recorded before the Fed’s meeting.
On the Kiwi front, Statz NZ has reported that the economy was in a technical recession in the second half of 2023. The Q4 Gross Domestic Product (GDP) for 2023 surprisingly contracted by 0.1%, while investors projected the economy to have grown at a similar pace. In the third quarter of 2023, the NZ economy also contracted by 0.3%. A weak NZ economic outlook could force the Reserve Bank of New Zealand (RBNZ) to consider early rate cuts.
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