Manufacturing PMI expanded at its slowest rate since December 2012. At a mere 50.2, it is close to contraction and, whilst we could hope this is just a blip, its 12-month average points markedly lower to suggest their business cycle has most likely peaked.
There are also some worrying signs of weakness within the sub-indices:
- New orders are expanding at their lowest rate since December 2017 and close to contraction
- Employment has contracted, and at its fastest rate since September 2016
- Production contracted for the first time since May 2015, and at its fastest in 7 years
- All trends are pointing lower to suggest NZ could be headed for a recession
However, these are leading indicators and will take time to filter through to the economy (and eventually weigh on growth). Yet as markets are forward looking, they’re acting now and pushing NZD markedly lower. Furthermore, any weakness in NZ tends to have an impact their neighbours and key trade partner Australia (and visa versa), which has seen their US-10 year crash to a new historical low of just 1.37%.
There’s a slight risk-off vibe on FX markets surroundingMiddle East tensions (even if stocks are shrugging them off, for now) which is weighing on NZD/JPY and AUD/JPY. That NZ saw such shocking PMI today makes NZD the weakest major by an easy margin.
- We can see on the daily chart that the trend structure is firmly bearish. A bearish engulfing candle marked a prominent swing high at a resistance zone and, at the time of writing, NZD/JPY is on the cusp of testing its cycle low. Moreover, bearish momentum suggests a downside break could be imminent.
- Whilst support could give way at any moment, we consider fading into minor rallies below the 38.2% retracement level and targeting the 2019 lows. Even if sentiment surrounding Iran were to reverse, it doesn’t remove issue of weak domestic data and likely calls for RBNZ to cut and follow a dovish RBA in lockstep.
Related Analysis:
NZD/CAD Could Be Gearing Up For A 300 Pip-Slide
AU Unemployment Miss Drives The Aussie Lower | AUD/USD, AUD/JPY
CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.