New Zealand Dollar Suffers as Domestic Uncertainty Outweighs Cooler US Inflation

The New Zealand Dollar (NZD) is struggling against the US Dollar (USD), weighed down by domestic political uncertainty and softer economic data. The NZD/USD pair traded near 0.6130, down 0.4% on the day, after failing to hold earlier gains.

The recent controversy surrounding the government's handling of COVID-19 has intensified political uncertainty in New Zealand, leading to calls for a parliamentary inquiry and renewed criticism of the coalition government. This has negatively impacted investor sentiment, as markets typically prefer stable political environments.

Additionally, recent data showed a slowdown in New Zealand's manufacturing activity and a dip in business confidence, further dampening the outlook for the kiwi. The softer US inflation report, which came in below expectations, initially weighed on the USD but had little impact on the NZD/USD pair.