- New Zealand releases Performance of Services Index on Tuesday
The New Zealand dollar is flat at the start of the week. In the European session, NZD/USD is trading at 0.6116, up 0.01%. It was a rough week for the New Zealand dollar, which declined 2% and fell to a five-week low.
New Zealand’s economy has struggled in the fourth quarter and the gauge of services activity, the Performance of Services Index (PSI) posted three contractions in the second half of 2023. The PSI improved to 51.2 in November, up from 49.2 in October, indicating weak growth. We’ll get a look at the December report on Tuesday.
China maintains benchmark lending rates
With global inflation on the decline, major central banks have likely ended their rate-tightening cycles and are looking to lower interest rates. In China, the central bank (PBOC) has been under pressure to lower rates due to the economic slowdown and deflationary pressures which have pushed up real borrowing costs. The PBOC has stood pat, not wanting to put further pressure on the yuan, which has fallen 1.4% in January against the dollar. The PBOC kept the one-year loan prime rate (LPR) at 3.45% and the five-year LPR at 4.20% on Monday, as expected. The decrease in economic activity is bad news for New Zealand, as China is its largest trading partner.
What a difference a week can make. In the case of Fed rate odds, the markets have become less confident that the Fed will press the rate-cut trigger in March. Just one week ago, the probability stood at 78% but that has fallen to 48% at present, according to the CME’s FedWatch tool. The Fed has pushed back against market expectations of six rate cuts this year, starting in March. Last week, Atlanta Fed President Bostic said he did not expect rate cuts until the third quarter and San Francisco Fed President Daly said the Fed would have to be “patient” about rate cuts.
NZD/USD Technical
- 0.6150 and 0.6211 and are the next resistance lines
- There is support at 0.6054 and 0.5993
