FX.co ★ New Zealand Dollar Declines

On Tuesday, the New Zealand dollar dipped to approximately $0.592, surrendering some of its previous gains as the recent interest rate cut in China exerted downward pressure on the Kiwi, which is often regarded as a liquid proxy for the yuan. This pressure was compounded by April's slowdown in Chinese retail sales, indicating weaker consumer demand and raising concerns for New Zealand's exports due to their close trading relations with China. Domestically, inflationary pressures resurfaced, with the first quarter data revealing the sharpest increase in producer output prices in nearly three years. Despite this, a recent PMI report indicated that the services sector remains in contraction, highlighting ongoing economic challenges and bolstering expectations for further interest rate reductions. Financial markets continue to anticipate a 25 basis point cut by the Reserve Bank of New Zealand (RBNZ) later this month, though many now believe that the easing cycle is approaching its conclusion, likely settling at 3%. Meanwhile, focus is shifting to Thursday’s government budget, which is anticipated to decrease baseline spending for 2025.