NZD/CAD hovers above 6-week low ahead of RBNZ meeting

The New Zealand Dollar retreated against its Canadian counterpart for a fourth straight trading day on Friday and was set for a 0.94% weekly loss, as market players were cautious ahead of the Reserve Bank of New Zealand’s policy meeting next week.

The central bank is largely expected to leave the official cash rate without change at 5.5% at its August meeting.

Still, the RBNZ board had said the cash rate would have to remain at a restrictive level in order to bring inflation back down to RBNZ’s target range of 1% to 3% by the second half of 2024.

The RBNZ has delivered a total of 525 basis points of interest rate hikes since October 2021.

In terms of macro data, New Zealand’s annual food inflation decelerated to a 10-month low of 9.6% in July from the 1987 record high of 12.5% in June.

And, New Zealand’s manufacturing sector contracted for a fifth consecutive month in July and also at the steepest rate since August 2021 when the island country was last in a COVID-19 lockdown.

The BusinessNZ Performance of Manufacturing Index dropped to a reading of 46.3 in July from 47.5 in June. The sub-index of production decreased to levels not seen since August 2021, while the gauge of employment dropped to its lowest level since May 2020.

Meanwhile, CAD traders now set their focus on Canadian CPI inflation numbers for July due out next Tuesday.

As of 9:32 GMT on Friday NZD/CAD was edging down 0.19% to trade at 0.8080. During the late phase of the Asian session, the minor Forex pair went down as low as 0.8070. The latter has been the pair’s weakest level since June 30th (0.8030).