NZD/USD Rises Above 0.6300 As a Result Of New Zealand's Business PMI

In the early Asian session, the NZD/USD pair edges higher and remains barely above the 0.6300 region. Prior to the release of the Producer Price Index (PPI) for the North American session, investors are digesting the Reserve Bank of New Zealand's monetary policy and weaker US data.

The Reserve Bank of New Zealand (RBNZ) maintained the Official Cash Rate at 5.50% on Wednesday, as anticipated by the market. The June Business NZ PMI for New Zealand decreased to 47.5 from 48.9 in May, falling short of the anticipated 49.8. The number reached its lowest point since November 2022. Additional information revealed that the major sub-index fell into contraction territory, with Production falling to 47.50 and New Orders falling to 43.8.

The NZD/USD pair is supported, however, by the general weakening of the US Dollar. The US Dollar Index (DXY), a measure of the Greenback's value relative to a weighted basket of currencies, fell to its lowest level since April 2022 after Wednesday's weaker US inflation data.

The US Consumer Price Index (CPI) data indicated a decline in inflation. According to the US Bureau of Labour Statistics, the Consumer Price Index (CPI) for June decreased to 3% YoY from 3.1% previously, while core inflation MoM decreased to 0.2% from 0.3% previously, marking the smallest increase since August 2021.

The markets have priced in a 25 basis point (bps) rate hike at the Fed's policy meeting on 25-26 July, according to CME Group's FedWatch instrument. However, the likelihood of additional rate increases before the end of the year has diminished significantly.

In the absence of any pertinent economic data releases from New Zealand, market participants will look to the US Producer Price Index (PPI) for guidance. In addition, the US will release Unemployment Claims and the University of Michigan Preliminary Consumer Sentiment later in the week.