NZD/USD can't catch a break ahead of the RBNZ
- It is RBNZ day in the Asian session and the kiwi is quiet ahead of the event.
- The MPS will be held against a backdrop of fragile global markets.
NZD/USD is down some 0.12% into the close on Wall Street in what has been a day of little activity for the pair, bounded by support and resistance, changing hands between 0.6423 and 0.6468 ahead of the Reserve Bank of New Zealand.
''Equities and bond yields are also lower in the US, and general market volatility remains high, and as with last time, the MPS will be held against a backdrop of fragile global markets,'' analysts at ANZ Bank explained.
''That does mean it has to compete with other factors for impact, but with fears of a hard landing at the core of what’s eating away at risk sentiment, as we’ve been saying for a while, if the RBNZ can strike the right balance between “we’ve got this” on inflation while signalling that it is cognisant of recession risks (not an easy job) while also preserving optionality, that’d likely be positive for the Kiwi.''
As for the greenback, the US dollar index has been on the backfoot and it hit nearly a one-month low while European Central Bank President Christine Lagarde said eurozone interest rates will likely be in positive territory by the end of the third quarter. The markets are starting to price in a higher interest rate regime around other central banks which is stripping the greenback of some demand. Against a basket of other major currencies (DXY), the dollar was down to 101.646, its lowest level since April 25.
Reuters reports that the greenback weakened further after data showed US business activity slowed in May as higher prices cooled demand for services while renewed supply constraints because of COVID-19 lockdowns in China and the war in Ukraine hampered production at factories.
''S&P Global said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, showed the pace of growth was the slowest in four months.''