Kiwi Soars on Hawkish RBNZ Outlook Amid Soft Economic Data

The New Zealand Dollar (NZD) has gained ground against the US Dollar (USD) after four days of losses, trading around 0.5870 during early European hours on Friday.

This gain comes as traders continue to price in a Reserve Bank of New Zealand (RBNZ) rate hike next month, with the bank repeatedly stressing the need to withdraw some of its policy support.

However, soft economic data released this week has raised questions about the extent to which the RBNZ can continue tightening its monetary policy. The Business NZ Performance of Manufacturing Index fell to 54.3 in July from an upwardly revised 60.1 in June, a slowdown that highlights emerging uncertainties for the economy.

Brown Brothers Harriman's Elias Haddad notes that the latest RBNZ survey shows inflation expectations remain close to the RBNZ 2% target midpoint for inflation, underscoring the bank's credibility.