Key Moments:

• The NZD/USD pair rose to 0.5915 on Monday, boosted by a depreciation of the US dollar.
• The April Performance of Services Index of New Zealand fell to 48.5, while the Producer Price Index revealed that input and output prices increased by 2.9% and 2.1%, respectively.
• Key New Zealand economic data releases this week, including trade balance figures and Thursday’s budget, will influence NZ Dollar sentiment.

NZD/USD Supported by US Dollar Slide

The New Zealand dollar gained ground against the greenback on Monday, with the NZD/USD climbing 0.57% to hit 0.5915. The uptick followed a downgrade of the US credit rating by Moody’s, the first in over a century, which weakened the US Dollar broadly. However, the currency pair struggled to surpass its previous session high.

Service Sector Weakness Deepens

New Zealand’s services industry continued to struggle in April, as the Business NZ Performance of Services Index (PSI) slipped to 48.5, 0.6 below March’s reading of 49.1.

Doug Steel, Senior Economist at BNZ, observed that despite discussions surrounding economic recovery, the PSI served as a strong reminder of the severely challenging current economic climate. He further noted that New Zealand’s PSI continued to be weaker than that of all its major trading partners, and its level of 48.5 indicated a service sector that was still contracting.

Overall, the decline marked the lowest level in around seven months and pointed to sustained contraction in the sector.

Meanwhile, New Zealand’s Producer Price Index showed significant increases unseen since 2022’s second quarter. Q1 of 2025 witnessed a 2.9% quarter-over-quarter jump in input prices. This served as a complete rebound from the 0.9% decline observed in 2024’s Q4. Output also climbed, with the 2.1% rise reversing the last quarter’s 0.1% fall.

Market Outlook: Packed Economic Calendar Ahead

Investors are awaiting several key domestic data releases that may shape sentiment toward the New Zealand Dollar in the coming days. Trade balance figures are set to be released on May 21st. Radio New Zealand anticipates that budget announcements scheduled for Thursday will reveal a reduction in baseline government spending from NZ$2.4 billion to NZ$1.3 billion.

Last but not least, Friday’s first-quarter retail sales data will be critical in gauging household consumption trends. It may also influence projections for the Reserve Bank of New Zealand’s policy.