NZD/USD advances above 0.6300 following NZ business PMI

• NZD/USD’s upside gains traction and advances above the 0.6300 area on Thursday.
• New Zealand Business NZ PMI fell to 47.5 in June from 48.9 in May.
• Extended US Dollar weakness broadly helps boost the Kiwi.
• Market players will shift their focus to the US Producer Price Index (PPI) due later in the day.

The NZD/USD pair edges higher and remains slightly above the 0.6300 area in the early Asian session. Investors digest the interest rate policy from the Reserve Bank of New Zealand and softer data from the US ahead of the Producer Price Index (PPI) due in the North American session.

The Reserve Bank of New Zealand (RBNZ) left the Official Cash Rate unchanged at 5.50% on Wednesday, as the market expected on Wednesday. Early Thursday, New Zealand’s Business NZ PMI fell to 47.5 in June from 48.9 in May, falling short of the 49.8 expected. The figure dropped to its lowest since November 2022. Further details showed that the major sub-index dropped into the contraction zone, with Production declining to 47.5 and New Orders down to 43.8. 

However, the weakening of the US Dollar across the board supports the NZD/USD pair. The US Dollar Index (DXY), a gauge of the Greenback’s value versus a weighted basket of currencies, slumped to the lowest since April 2022 following the softer US inflation data on Wednesday. 

The US Consumer Price Index (CPI)data showed inflation subsiding. According to the US Bureau of Labor Statistics, June's Consumer Price Index (CPI) declined to 3% YoY from 3.1% previously, while core inflation MoM fell to 0.2% from 0.3% prior, the smallest gain since August 2021. 

Markets have priced in a 25 basis points (bps) rate increase at the Fed's July 25-26 policy meeting, based on CME Group’s FedWatch tool. However, the possibility of further rate hikes before the end of the year has significantly decreased.

In the absence of any relevant economic data releases from New Zealand, market players will take cues from another US inflation figure, the Producer Price Index (PPI). Also, Unemployment Claims and the University of Michigan Preliminary Consumer Sentiment from the US will be released later in the week. 

NZD/USD: Technical levels to consider