FX.co ★ New Zealand Dollar Extends Losses

The New Zealand dollar declined to $0.591 on Friday, continuing its downward trend from the previous session. This movement followed the release of a robust U.S. Producer Price Index (PPI) report, which reduced the likelihood of the Federal Reserve implementing a significant interest rate cut in September and instead strengthened the U.S. dollar. Further weighing on sentiment were today's disappointing economic data from China, revealing weaker-than-expected retail sales and industrial production figures, thereby heightening concerns about China's economic growth. As New Zealand's principal trading partner, China's economic health directly impacts the New Zealand dollar, which is often used as a liquid alternative to the Chinese yuan. Domestically, market predictions now show a 95% probability of a 25 basis points decrease by the Reserve Bank of New Zealand next week, with another cut expected early next year that could lower rates to a minimum of 2.75%. On the economic front, New Zealand witnessed an increase in annual food inflation to 5% in July, marking the highest level since November 2023, up from 4.6% in June. Conversely, the country's manufacturing sector showed signs of recovery and growth in July, with all economic indicators indicating expansion. Over the course of the week, the New Zealand dollar has decreased by 0.6%.