NZD/USD loses ground as Terms of Trade Index (Q1) increased 1.9% QoQ in New Zealand, below an expected 3.1% rise.
China's Caixin Manufacturing Purchasing Managers' Index contracted to 48.3 in May, against a 50.4 expansion in April.
US ISM Manufacturing Purchasing Managers’ Index contracted to 48.5 in May from 48.7 in April.
NZD/USD pulls back from an eight-month high of 0.6055, trading around 0.6010 during the Asian hours on Tuesday. The pair depreciates as the New Zealand Dollar (NZD) struggles, possibly due to softer-than-expected Terms of Trade Index data, which increased 1.9% quarter-on-quarter in the first quarter, down from a 3.1% increase in the previous quarter and below market forecasts for a similar 3.1% rise. Export prices rose 7.1%, the largest rise in three years, while import prices climbed 5.1%, the biggest increase in 10 quarters.
Moreover, China's Caixin Manufacturing Purchasing Managers' Index (PMI) unexpectedly declined to 48.3 in May from the previous reading of 50.4, below the expected 50.6 expansion. However, the weekend data showed that the National Bureau of Statistics (NBS) Manufacturing PMI rose to 49.5 in May, from April’s 49.0 reading. The NZD could be impacted by Chinese economic data as both countries are close trading partners.
Last week, the Reserve Bank of New Zealand (RBNZ) Assistant Governor Karen Silk noted that interest rates are now within the neutral 2.5%–3.5% band following a 25 basis points rate cut. Silk also said that further policy decisions will be data-dependent.
However, the NZD/USD pair may regain its ground as the US Dollar (USD) may continue to struggle amid growing concerns regarding stagflation in the United States (US). US President Donald Trump threatened to double import tariffs on steel and aluminum, increasing them to 50% from 25%, effective Wednesday.
Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index eased to 48.5 in May from 48.7 in April. This figure came in weaker than the expectation of 49.5. Traders would likely observe the release of the JOLTS Job Openings later on Tuesday.
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