The New Zealand dollar (NZD/USD) continues to rally on Friday. NZD/USD is trading at 0.5702 in the European session, up 0.43% on the day.
Manufacturing PMI Unexpectedly Expands
New Zealand’s Manufacturing PMI rose to 51.4 in January, up sharply from the December reading of 45.9 and above the market estimate of 46.0. This was a milestone reading as it marked the first expansion in almost two years and was the highest level since September 2022. All key sub-categories posted growth, including new orders, production, and employment.
The manufacturing sector has started the year on a high note but the outlook for 2025 remains cloudy. Global demand has been weak and China, New Zealand’s largest export market, is experiencing a bumpy post-Covid recovery. Still, there are some bright spots which should provide a boost to manufacturing. The weak New Zealand dollar is good news for exports and interest rates are falling, with the central bank widely expected to lower rates next week.
The Reserve Bank of New Zealand meets on Feb. 19 and a rate cut is fully priced in, with the probability of a quarter-point or half-point cut at around 50/50. This should make for an interesting meeting and the New Zealand dollar could take a hit if policymakers chop rates by a half-point.
In the US, the PPI release showed little change in January. PPI rose 0.4% m/m, after an upwardly revised 0.5% gain in December. This was higher than the market estimate of 0.3%. Annually, PPI rose 3.5%, unchanged from an upwardly revised 3.5% gain in December and above the market estimate of 3.2%.
The US wraps up the week with the January retail sales report. The markets are bracing for a soft release, with a market estimate of -0.1%, after the 0.4% gain in December. Annually, retail sales are expected to dip to 3.7%, after a 3.9% gain in December.
NZD/USD Technical
- NZD/USD is testing resistance at 0.5698. Above, there is resistance at 0.5717.
- 0.5660 and 0.5641 are the next support levels.