New Zealand Dollar Loses But Quickly Recovers Following Poor Performance of Manufacturing Report
THE TAKEAWAY: Performance of Manufacturing Index Fell to 48.0 from 53.8 > Net Market Movement was Minimal as Traders Await the Results of Aussie Employment and Chinese CPI Data > NZDUSD Tracks Downward but Quickly Recovers
Data released by the Bank of New Zealand shows that business sentiment in the manufacturing sector fell during April. The performance of manufacturing index (PMI) decreased to 48.0 from 53.8, where the measure stood at the beginning of last month. Continuing its fall from a two-year high in February, the PMI change was driven by drops in production and new orders. Production fell 11.5 points to 44.6, and new orders dropped 6.5 points to 48.5.
Traders reacted negatively to the report, the results of which seemed to suggest a rate cut by the Reserve Bank of New Zealand (RBNZ) to be more likely. Currently, analysts expect a 57% probability of a 25 basis point interest rate cut at the central bank’s next meeting. Last month, the Board stated that should price levels continue to fall and financial market sentiment remain fragile, then “the [RBNZ] would need to reassess the outlook for monetary policy settings.”
The Kiwi had been trending downwards over the last few days; and, though the data release didn’t add significantly to the trend, the figure did precipitate a drop in the exchange rate. In the moments after the release, the NZDUSD made a stumbled from 0.7838 to 0.7828. However, the losses were only momentary, and the currency tracked upward in the following few minutes as traders looked forward to other market-moving reports due out later. Both the Australian employment report and Chinese CPI data are due out within the next 36 hours.