The US Dollar experienced broad-based weakness on Monday, driving both the New Zealand Dollar (NZD) and the British Pound (GBP) to their highest levels in months against the Greenback. NZD/USD extended its advance to trade around 0.5915, up 0.37% on the day and reaching its highest level since early June. This move occurred despite disappointing Chinese economic data, with China's Industrial Production rising 4.5% year-over-year in July (down from 5.3% in June and below the 5% market expectation) and Retail Sales slowing to 0.6% year-over-year (down from 1% previously and missing the 1.5% forecast). These figures reinforced concerns about China's domestic demand and growth prospects, but the NZD's limited reaction indicated that US Dollar dynamics were the primary driver for the currency pair [1].
Similarly, GBP/USD edged higher to trade around 1.3555, its highest level since May 12, as fading expectations of an imminent Federal Reserve rate hike weighed on the US Dollar. The US Dollar Index (DXY) traded around 99.45 after touching 99.30, its lowest since June 5. Technical indicators for GBP/USD remained bullish, with the pair holding above key moving averages and the Relative Strength Index (RSI) at 64.9, suggesting strong upward momentum. Strategists at UOB Group acknowledged that their recent neutral stance on GBP was premature, noting that the upward bias remains intact, though resistance is expected at the 1.3600 level [2].
The weakness in the US Dollar followed a series of US economic releases, including a 0.6% decline in US Retail Sales in July and easing inflationary pressures, which have led investors to scale back expectations for further monetary tightening by the Federal Reserve. This has weighed on the Greenback and supported both NZD and GBP [1][2].
For the New Zealand Dollar, the contrast with the Reserve Bank of New Zealand's relatively firm rhetoric on inflation risks and the need to maintain restrictive monetary conditions also provided support. However, analysts at Commerzbank argued that the latest data make a back-to-back rate hike by the RBNZ unlikely at its upcoming meeting in about two weeks, given softer New Zealand inflation indicators [1].
Caution remains warranted due to geopolitical tensions in the Middle East, with potential disruptions around the Strait of Hormuz possibly reviving demand for safe-haven assets and supporting the US Dollar. Investors are also awaiting the release of the Federal Open Market Committee (FOMC) meeting minutes on Wednesday for further clues about US monetary policy [1].
CONCLUSION
Both the New Zealand Dollar and British Pound have benefited from US Dollar weakness, reaching multi-month highs despite mixed economic data from China and the US. Market sentiment remains cautiously optimistic, but upcoming central bank meetings and geopolitical risks could influence future currency movements.