NZD/USD Rebounds Above 0.5900 Despite Weak New Zealand Services Data

NZD/USD gains on weaker US Dollar, but soft services data in New Zealand limits upside momentum

The New Zealand Dollar (NZD) rebounded modestly against the US Dollar (USD) on Monday, trading above the 0.5900 level at 0.5910, up around 0.50% on the day. The recovery was largely driven by broad US Dollar weakness after Moody’s downgraded the U.S. sovereign credit rating from Aaa to Aa1, shaking investor confidence in the Greenback.

Despite the rebound, NZD/USD failed to surpass the previous day’s high as mixed domestic data limited further upside. New Zealand’s Business NZ Performance of Services Index (PSI) dropped to 48.5 in April from 49.1 in March, signaling ongoing contraction in the services sector and marking the lowest reading since November. The data underscored continued weakness in a key part of the economy, with BNZ Senior Economist Doug Steel warning that the PSI suggests "things are still pretty hard" for service-related businesses.

Additionally, producer price data showed a sharp rise in input costs, up 2.9% for Q1, while output prices climbed 2.1%, indicating potential inflationary pressures. However, these gains did little to lift sentiment amid concerns over sluggish economic activity.

As a result, while NZD/USD benefitted from the US Dollar’s decline, the weak domestic backdrop may limit the pair’s ability to sustain stronger gains in the short term.