USD gains on positive PMIs, mixed signals from Fed officials; NZD/USD at risk of testing YTD lows

US equities fluctuated between gains and losses after S&P Global revealed an expansion in the US economy, bolstering the US Dollar (USD). S&P Global Manufacturing and Services PMIs for April exceed estimates above the 50 level, which usually delineates expansion/contraction in the economy. Therefore, the Composite PMI edged higher, at 53.5, above the prior reading of 52.3.

Federal Reserve officials hawkish rhetoric weighed in the NZD/USD for the third time in the week. Although the Philadelphia Fed President Patrick Harker signaled that the Fed is about to finish hiking rates, his colleague Cleveland’s Fed President Loretta Mester noted that rates should go above 5%, due to high inflationary pressures.

Given the lack of economic data from New Zealand, which reported inflation and was lower than the Reserve Bank of New Zealand (RBNZ) estimates of 1.8% QoQ, at 1.2%, could spark a pause on the RBNZ tightening cycle. The RBNZ delivered a hawkish 50 bps hike at its latest meeting.

Ahead of the week, the US economic docket will feature Fed Governor Lisa Cook as traders prepare for the weekend.