FX.co ★ New Zealand Dollar Extends Gains

The New Zealand dollar continued its upward trajectory, reaching approximately $0.590 on Monday, as investors evaluated economic data and its implications for monetary policy. First-quarter Producer Price Index (PPI) rose 2.1%, marking the most significant increase in nearly three years. This rise indicates renewed inflationary pressures and suggests a more restrictive approach to interest rates may be warranted. However, a recent Purchasing Managers' Index (PMI) report indicated ongoing contraction in the services sector, further suggesting an economic slowdown. The markets predict a 25 basis point rate cut by the Reserve Bank of New Zealand (RBNZ) later this month. Nonetheless, there is growing sentiment among investors that the monetary easing cycle is nearing its end, with rates likely to bottom out at 3%. In addition, April's reduction in Chinese retail sales pointed to tepid consumer demand, which threatens New Zealand's exports due to their close trade ties. Traders are now focused on Thursday's government budget announcement, which is expected to decrease baseline 2025 spending to NZ$1.3 billion from the previously projected NZ$2.4 billion.