New Zealand dollar rises despite soft Services PMI

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<li>New Zealand Services PMI declines</li>
<li>US manufacturing data climbs, consumer sentiment falls</li>
</ul>
<p>The New Zealand dollar has started the week in positive territory. NZD/USD is trading at 0.5918 in the North American session, up 0.34%.</p>
<p><strong>New Zealand’s Services PMI declines</strong></p>
<p>New Zealand’s Services PMI eased to 47.1 in August, down from 47.8 in July. The reading marked a third straight decline in activity and was the lowest level since January 2022. This comes on the heels of Friday’s Manufacturing PMI, which fell to 46.1 in August, down from 46.6 a month earlier. This was the sixth consecutive month of contraction (the 50.0 line separates contraction from expansion).</p>
<p>The Reserve Bank of New Zealand has been forecasting a recession and the weak PMIs support this view. New Zealand’s economy has cooled down due to the central bank’s steep tightening and global demand has weakened, most notably with China experiencing a slowdown and deflation. The RBNZ paused at the August meeting and interest rates may have peaked. If economic data remains weak, I would expect the RBNZ to prolong the pause at next month’s meeting.</p>
<p>The US ended last week with mixed releases. The Empire State Manufacturing Index surprised and jumped to 1.9 in September, up from -19 in August and above the market consensus of -10. The UoM consumer sentiment index slowed to 67.7 in September, down from 69.5 in August and shy of the market consensus of 69.1 points. Inflation Expectations fell to 3.1% in August, down from 3.5% in July and the lowest level since March 2021. This is another sign that inflation is weakening and supports a pause at the Federal Reserve meeting on Wednesday. The markets have priced in a pause at 99%, according to the CME FedWatch tool, up from 92% one week ago.</p>
<p>.</p>
<p><strong>NZD/USD Technical</strong></p>
<ul>
<li>NZD/USD is testing resistance at 0.5908. The next resistance line is 0.5936</li>
<li>There is support at 0.5871 and 0.5843</li>
</ul>
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