New York Empire State Manufacturing Index Surges, Lifting USD

Empire State Index surges, USD gains, and RBNZ cuts rates. The market awaits Fed minutes, the gold outlook is weak, and global currencies face volatility.

Surprisingly, the New York Empire State Manufacturing Index increased significantly by 18.3 points, reaching +5.7 in February. This unexpected rebound surpassed market expectations of -1, signaling a slight recovery in business activity across New York State. The latest data indicated that employment levels declined while new orders and shipments experienced moderate growth.

Inflationary pressures also intensified, with input costs rising faster in nearly two years. Consequently, selling prices saw a noticeable uptick. Despite the improvement in manufacturing activity, business optimism for the future took a hit, as firms expressed concerns about economic conditions over the next six months. However, they still anticipate an eventual improvement.

This positive manufacturing data boosted the U.S. Dollar Index (DXY), which reached an overnight high of 107.12. The dollar’s upward momentum will persist through Wednesday.

Implications for the Asia Session

As expected, the Reserve Bank of New Zealand (RBNZ) implemented its fourth consecutive rate cut, reducing the Official Cash Rate (OCR) by 50 basis points. This marked the third successive 50-bps cut since the central bank initiated its easing cycle in August 2024. The OCR now stands at its lowest since late 2022, reflecting rising unemployment, slowing economic growth, and cooling inflation.

The New Zealand dollar (NZD) tumbled nearly 0.5% after the announcement. Market focus now shifts to RBNZ Governor Adrian Orr’s press conference at 4:30 a.m. GMT. If he signals further dovish policies, the NZD could face additional downward pressure.

New York Empire State Manufacturing Index Surges, Lifting USD

U.S. Federal Reserve & Dollar Outlook

Markets eagerly await the release of the Federal Open Market Committee (FOMC) meeting minutes at 7:00 pm GMT. These minutes will provide insights into the economic and financial conditions that influenced the Federal Reserve’s decision to maintain the Federal Funds Rate within the 4.25–4.50% range on January 29. The greenback could see further gains if the minutes indicate a hawkish stance.

Key points from the Fed’s latest statement include:

• The unanimous decision to maintain the Federal Funds Rate.
• An ongoing commitment to achieving maximum employment and 2% inflation.
• Upward revisions in GDP growth forecasts for 2024 and 2025.
• A steady reduction in the Federal Reserve’s bond holdings.

The next FOMC meeting is on March 18–19, 2025.

Gold Market Outlook

Gold traders are bracing for potential volatility with the upcoming release of the FOMC minutes. If the Fed maintains a firm stance on inflation control, the precious metal will experience some downward pressure. The short-term outlook for gold remains weakly bearish.

Currency Market Developments

• Australian Dollar (AUD): The AUD declined sharply following its first rate cut since November 2020, with further weakness expected as bearish sentiment prevails.
• New Zealand Dollar (NZD): The NZD remains under pressure after the RBNZ’s aggressive rate cut and could see further declines depending on Governor Orr’s outlook.
• Japanese Yen (JPY): USD/JPY has rebounded above 152, with demand for the U.S. dollar expected to keep the yen under pressure.
• Euro (EUR): Despite positive economic sentiment data, the euro remains weak and struggles to gain traction against the dollar.
• Swiss Franc (CHF): The franc weakened as USD/CHF climbed above the 0.9000 mark, with further upside likely.
• British Pound (GBP): Analysts will closely watch the U.K.’s CPI data. Higher-than-expected inflation could support the pound, while lower figures may trigger further declines.
• Canadian Dollar (CAD): Despite stronger consumer inflation, demand for the loonie remains subdued.

Conclusion

Markets focus on central bank decisions, inflation trends, and global economic conditions. The U.S. dollar maintains a slight bullish bias as traders await key data releases, while risk-sensitive currencies such as the AUD and NZD face continued pressure.

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