Traders price in a Reserve Bank of New Zealand rate increase next month despite softer economic data, lifting the Kiwi Dollar.
NZD/USD climbed to 0.5870 in early European trading, recovering from four consecutive sessions of losses. The gain follows sustained expectations of a Reserve Bank of New Zealand rate hike in September, as policymakers emphasize the need to withdraw stimulus to curb inflation.
Recent economic data has clouded the outlook, however. July’s Business NZ Performance of Manufacturing Index fell to 54.3 from a revised 60.1 in June, signaling a slowdown despite remaining above the long-term average of 52.5. Inflation expectations, meanwhile, remain anchored near the RBNZ’s 2% target midpoint, reinforcing the central bank’s credibility.
The US Dollar’s decline ahead of July US Retail Sales data also supported the pair’s upward move.