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The NZD/USD pair has gained support from the Reserve Bank of Australia’s hawkish stance and the weaker US dollar during the US holiday session. The uncertain economic outlook in the US due to mixed data and recession fears increases the likelihood of rate hikes.
New Zealand’s QSBO improves in Q2, but highlights weakening demand and labor challenges. The NZD/USD exchanges hands at 0.6197 after hitting a daily low of 0.6140, up by 0.75%. Global stocks are trading upbeat on thin liquidity conditions as the US cash markets remain closed.
The latest round of US economic data has painted an uncertain economic outlook, with the soft reading of the Fed’s preferred gauge for inflation and contractionary June’s ISM Manufacturing PMI increasing the likelihood of a hard landing as recession fears increase.
During the Asian session, the New Zealand Institute of Economic Research’s QSBO improved in Q2 to -63.0% vs. -66.0 prior. The report highlighted weakening demand and capacity utilization among builders and manufacturers, and difficulties in finding labor, especially unskilled workers.
The Reserve Bank of Australia’s June monetary policy decision to keep rates unchanged but tilted hawkish opened the door for additional tightening and underpinned the New Zealand Dollar against the US Dollar.
The US Dollar Index erased some of its Monday’s gains and is down 0.02% at 102.941. In the short term, US Treasury bond yields are rising, while 20s and 30s print minuscule losses. The New Zealand economic docket is light throughout the week, but it will get some traction until next week’s Reserve Bank of New Zealand monetary policy decision, which is expected to keep rates unchanged.
