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New Zealand’s NZ$190M social investment fund fails to boost NZD amid cautious market sentiment.
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Fed Chair Powell emphasizes adapting the policy framework to ongoing supply shocks.
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Cooling US inflation and weak retail sales dampen sentiment, while Powell’s comments support the US Dollar.
The New Zealand Dollar (NZD) weakened against the US Dollar (USD) on Thursday, pressured by a stronger Greenback and cautious market sentiment following recent economic developments.
At the time of writing, NZD/USD was down 0.43% at 0.587 as investors digested New Zealand’s latest fiscal policy announcement, softer US inflation data, and remarks from Federal Reserve Chair Jerome Powell.
US Inflation Cools and Retail Sales Disappoint, Yet Powell’s Comments Support USD
NZD/USD declined despite US data indicating easing inflation pressures, which would typically weaken the Dollar and boost risk-sensitive currencies like the Kiwi. April’s producer price inflation and core inflation figures came in below expectations, reinforcing market speculation that the Federal Reserve may consider interest rate cuts later this year. However, subdued US retail sales and cautious remarks from Fed Chair Powell tempered risk appetite.
In his Thursday comments, Powell emphasized the need for the Fed’s policy framework to adapt to persistent supply shocks, stating, “The framework needs to be robust to many circumstances, including a world where supply shocks may be more frequent and persistent.” While acknowledging the possibility of structural changes, he reaffirmed the Fed’s commitment to anchoring inflation expectations. These statements, combined with weaker consumer data, provided mild support for the US Dollar as investors reassessed the near-term economic outlook.
New Zealand Unveils NZ$190 Million Social Investment Fund
Domestically, the New Zealand government introduced a NZ$190 million (approximately $112 million) social investment fund as part of its 2025 budget plans. Finance Minister Nicola Willis described the initiative as a targeted, data-driven effort aimed at improving outcomes for vulnerable populations. “It’s about government investing earlier, smarter, and with much more transparent measurement of the impact interventions are having,” Willis explained. Despite the fund’s long-term focus on fiscal responsibility and social progress, it offered little immediate support to the NZD amid broader economic pressures.
Upcoming Data and RBNZ Outlook in Focus
Looking ahead, markets will closely watch Thursday evening’s Business NZ Performance of Manufacturing Index (PMI) and Friday’s Reserve Bank of New Zealand (RBNZ) inflation expectations survey. The PMI, last recorded at 53.2, serves as an indicator of economic momentum, while the inflation expectations survey, previously at 2.06%, could influence the central bank’s monetary policy stance. A rise in inflation expectations may bolster a hawkish RBNZ outlook, potentially providing support to the New Zealand Dollar.
