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Daily Pivots: (S1) 142.94; (P) 143.75; (R1) 144.32; More...

Intraday bias in USD/JPY remains neutral as sideway trading continues. On the downside, break of 142.10 support will resume the fall from 148.64 to retest 139.87 low. On the upside, above 145.46 will turn bias to the upside for 146.27 first. Firm break there will target 148.64 resistance.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Markets

Add trade uncertainty, geopolitical tensions and underwhelming economic data in a bowl, mix it and top it off with solid demand for one of the most closely watched long-term US bond auctions in recent history. The outcome: significantly lower core bond yields. US yields fell another 4.4-7.6 bps in a bull flattening move yesterday. Optimism, if any, after the US and China reinstated the Geneva trade truce quickly faded after Trump’s renewed threat to impose unilateral trade tariffs in two weeks or so. On the geopolitical front, tensions with Iran are running increasingly high. Suspense has been growing over the last couple of days and culminated in Israel bombing Iranian nuclear facilities overnight. Two top military commanders were killed along with several prominent scientists. Iran already started a retaliatory response. Oil prices surged more than 13% at some point. Brent pared some of those gains but still trades around $75/b, the highest since early April. Around a month ago, Brent was struggling not to drop below $60/b. Yesterday’s economic data included slower than expected PPIs and an unexpected increase in jobless claims to 248k. Both of secondary importance but coming after the slight miss in the CPI the day before nevertheless picked up as an argument for some bond buying. And then finally the 30-year US bond sale. Demand was solid and the auction stopped through the WI yield, triggering some kind of a relief rally on the part of the curve that represents all the kinds of US risk markets need to deal with lately: inflation, public finances, growth, institutional. German bunds attracted a (safe haven) bid too, pushing yields down 2.9-7.3 bps in a similar bull flattener. Dollar weakness lifted EUR/USD towards the highest level since 2021 north of 1.16 before paring losses to below that level in the close. The overnight risk-off is helping the greenback a hand as well, maybe via higher oil prices (the US turned from net energy importer to self-reliant to a net exporter), but we’re not so sure this is a durable driver. The geopolitical theme tends to have a short shelf live for markets and it doesn’t offset all of the other lingering dollar negatives. But it can set the tone for today of course. Stock markets are a sea of red in Asian dealings and are set for a lower open in Europe and the US. Treasuries extend gains and Bunds will probably do the same at the cash market open. The German fiscal narrative moved to the background these last couple of weeks but that doesn’t mean things are idle. The Financial Times reported that Germany seeks to fast-track spending from its €500bn infrastructure fund by addressing the poor state of its railway first. This became the symbol of Germany’s years of underinvestment. No longer: €22bn infrastructure investments earmarked for 2025 (of which €10.5bn for railways) would grow to €35bn a year until 2029. FYI: this comes on top of the de facto unlimited defense spending pledge Germany made early March. As this week draw to a close, attention already shifts to the next with the Fed policy meeting taking center stage. Rates will remain unchanged, despite pressure from the White House, including president Trump (arguing for a 100 bps cut) and VP Vance. The WH’s growing frustration is causing speculation in markets that Trump could soon (shortly after the Fed decision?!) nominate Powell’s successor. The idea is that acting as a shadow Fed chair, he could then already start talking markets towards lower rates when taking over the helmet in May next year.

News & Views

The June KPMG and REC UK jobs survey compiled by S&P Global on the UK labour market showed mixed signals. The report points to a further reduction in UK recruitment activity in May with survey members reporting that weaker confidence around the outlook and concerns over costs had dampened staff hiring. Permanent placements fell at a slightly sharper rate. At the same time, the decline in temp billings was the slowest in six months. On the supply side of the labour market, candidate supply expands at sharpest rate since end of 2020 amid reports of redundancies and fewer job opportunities. Vacancies still declined at a solid pace suggesting lower demand, but the downturn eased during the survey period. Pay growth strengthened again, but remained below trend.

The government of Poland on its website published some economic variables that will be used as the basis for its next year’s budget. The government expects annual inflation to ease to 3% in 2026, compared to the NBP’s 3.4% in its March inflation report. The government left the 2026 growth forecast unchanged at 3.6%. Average wage is seen at 6.7% for the overall national economy and at 6.9% (from 7.7% in the April forecast) for the corporate sector. The government sees registered unemployment at 4.9%.

Oil jumped as much as 13% after Israel launched a major and unprecedented attack on Iran, targeting nuclear and military facilities.

While the news isn’t entirely surprising—there had been reports of Israel preparing action and the U.S. ordered Americans to leave the region earlier this week—the Israeli strikes could mark the beginning of wider regional tensions. If Israel continues operations beyond its borders, the Middle East could heat up fast.

Latest: Israel says Iran’s nuclear program poses an existential threat and vows that its operation will continue for as long as necessary. Iran has already launched hundreds of drones in retaliation and could go further. But how much further?

Back in October 2024, Israel had launched a major strike on Iranian nuclear facilities. At the time, Iran responded with drone attacks that were mostly intercepted and perceived more as a warning than a retaliation. Tensions eventually eased and markets quickly settled. A similar de-escalation is possible now—but not guaranteed. Judging by the price action, the market’s response to last night’s attack has been very strong.

The price of US crude jumped as much as 13%, trading past $77 per barrel in the early hours of today, while Brent also surged past $76pb. Prices have since pulled back slightly, but tensions are far from over.

One scenario is de-escalation, which could bring oil back below $70 per barrel, around the 200-day moving average, shifting the market's attention back to supply-demand dynamics, trade disruptions, and renewed pressure on Russian oil.
The other scenario is broader escalation, potentially pushing oil prices toward $90–$100 per barrel—hopefully only temporarily.

Beyond oil, if tensions disrupt transit through the Strait of Hormuz, LNG flows could also be hit—as roughly one-fifth of global LNG passes through the strait. So far, there's no major price action on that front. Let’s hope tensions ease before broader disruptions emerge.

US and Iran are expected to meet in Oman this Sunday to discuss Iran’s nuclear program—so this weekend could bring fresh developments.

Naturally, rising geopolitical tensions are powering haven assets. Gold is up 1%, trading just below its all-time high, while the USDCHF is flirting with the 0.80 support level despite broad US dollar strength.

Yet, that US dollar rebound follows a sharp drop—recent lows not seen since April 2022—on the back of another round of soft inflation data released yesterday. US producer prices rose less than expected in May, easing concerns that inflation would spike in response to tariffs.

The US 2-year yield slipped below 3.90% on rising expectations of a dovish Federal Reserve (Fed), though Fed funds futures still price less than a 30% chance of a July rate cut. On the long end, the 10-year is seeing haven flows on Mid-East tensions, and the 30-year also found demand—particularly after yesterday’s $22bn auction attracted strong interest, suggesting that markets have absorbed latest US debt worries. America can keep spending—markets will finance it. What a wonderful world.

In equities: soft inflation and falling yields supported US equities yesterday, but futures are sharply lower this morning. Oil and defense stocks will likely benefit from rising tensions, but the rest of the market should remain under pressure.

Looking beyond geopolitics and risk-off mood, US equity valuations look stretched, especially compared to bond yields. The equity risk premium—the difference between equity and Treasury returns—has fallen to its lowest since 2002 for the S&P500, and is now negative. That means investors currently get better returns from US Treasuries than from the S&P 500, which yields around 3.60%.

That relatively low return is partly due to the relentless rally in Big Tech and partly due to yields hitting multi-decade highs. Excluding the Magnificent 7, the rest of the S&P 493 yields about 5%—but even then, they offer only a minor risk premium over Treasuries, which are supposed to be ‘low risk.’ How low that risk really is, of course, is debatable. But history shows the US has always managed to make markets digest its debt.

Anyhow, many investors may prefer to take risk off the table ahead of what could be a volatile weekend in terms of geopolitical headlines.

In focus today

In the euro area, we receive industrial production data for April. Industrial production surged by 2.2% q/q in Q1, mainly driven by front loading of exports to the US from Ireland, which recorded a 32% m/m increase in February and 45% m/m in March. Excluding Ireland, production rose 1.0%, which is still stronger than late last year. April's data may be influenced by Ireland's volatility and US tariffs, warranting careful interpretation.

US releases preliminary consumer confidence for June from University of Michigan. It has taken a big hit in recent months but is expected to increase slightly on the back of lower oil prices and stronger equity markets. Focus will also be on inflation expectations, which increased sharply in recent months and moderated only slightly in May.

In Sweden, we get the details of the May inflation numbers at 8.00 CET. Flash estimate last week showed core inflation (CPIF ex Energy) at 2.5% y/y, 0.2pp below the Riksbank's forecast from March (but in line with our own). The reason for the deviation from the Riksbank's forecast is likely the government's extended tax deduction for home renovations, suggesting a neutral impact on forecasts.

On Monday, China releases key monthly batch of data for May, including retail and home sales, home prices and industrial production. We look for more of the same with sluggish retail sales around 5% y/y, a tentative bottoming in home sales and still robust industrial production around 6%. China navigates the US trade war with stimulus supporting the economy, yet unable to ignite strong recovery or consumer growth.

Economic and market news

What happened overnight

In the Middle East, Israel's attack on Iran's nuclear and military sites has caused oil prices to surge by 9% to USD 75.65 per barrel. This occurs just days before US-Iran nuclear negotiations set in Oman for Sunday. Yesterday, Trump commented that negotiations were "fairly close to a pretty good agreement" and expressed his desire for Israel to refrain from attacking Iran, as it might jeopardise the prospects of a deal. The attack adds significant uncertainty to diplomacy, with US officials denying direct involvement while cautioning that it could either hinder or, unexpectedly, pressure Iran towards discussions.

What happened yesterday

In the US, May PPI ex-food and energy rose modestly by 0.1% m/m, below the expected 0.3% m/m, echoing the subdued CPI results from yesterday despite tariffs. Furthermore, the services PPI, excluding trade, transportation, and warehousing, remained slightly negative for the second consecutive month. Coupled with the weak services CPI reported yesterday, these indicators suggest that underlying price pressures, excluding tariff distortions, continue to be contained. Continuing jobless claims experienced a slight uptick, reaching 1.956m from the previous 1.904m. It was the highest level since 2021 suggesting the unemployment rate is heading higher.

Trump has intensified pressure on the Fed, warning that he might be "forcing something" if interest rates are not lowered. He reiterated his call for a deep rate cut of 1 percentage point, aiming to reduce borrowing costs and save the US hundreds of billions annually on its debt. However, Trump clarified he would not fire Powell before his term concludes in May 2026.

In Norway, the Q2 regional survey shows that aggregate output matches market and Norges Bank expectations at 0.4% for Q2 and Q3, with capacity utilization stable at 35%, indicating normal levels. Employment growth is expected to remain at 0.2%, reflecting a cautious labour market approach. However, investment growth projections have decreased significantly, with 2025 expectations falling from 0.5% to -0.9%, and next year from 0.8% to 0.1%, indicating reduced business optimism. Wage growth forecasts align with Norges Bank's predictions, suggesting stability. Overall, these factors point towards a likely rate cut in September.

Equities: A rather counter-intuitive session in equities yesterday. Despite a string of softer-than-expected US macro releases, global equities managed to close marginally higher as US stocks advanced during the session. The combination of lower-than-expected PPI prints and initial/continuing jobless claims drove yields notably lower, particularly in the long end, flattening the US curve. From a pure macro standpoint, this should not have been equity-positive - and in many ways, the internals confirmed this, with defensive sectors outperforming and the VIX ticking higher. Part of the lift came from a different direction altogether: political news out of the US suggesting a stronger push for bank deregulation, which helped lift bank stocks significantly.

Another key point: Relative to other regions, US macro data continues to underperform - and FX movements supported that narrative yesterday. The softer USD helps export competitiveness, and we saw that theme quietly support parts of the equity market as well. In the US yesterday, Dow +0.2%, S&P 500 +0.4%, Nasdaq +0.2% and Russell 2000 -0.4%. Fast forward to this morning, and the tone has shifted dramatically. Reports of Israeli strikes inside Iran overnight have rattled global markets. Brent crude surged by nearly 10%, sending Asian equities sharply lower and pushing European and US equity futures down 1-2%.

FI and FX: Sharp rise in the crude oil price and equity futures firmly in red after Israel's strike on Iran. EUR/USD which was supported by tariff jitters and benign US inflation data and printed a fresh year high at 1.1630 yesterday is back at 1.1530. Treasuries had another strong session with US10Y dropping firmly below 4.40%, while the Fed September contract indicates -25bp (week started at -17bp). USD/Scandies have bounced up again after they also printed new year lows yesterday. EUR/SEK has erased all losses from yesterday amid renewed risk off and is back at 10.96, whereas EUR/NOK remain at 11.50.

Daily Pivots: (S1) 0.8067; (P) 0.8138; (R1) 0.8174; More….

Intraday bias in USD/CHF remains on the downside, with immediate focus now on 0.8038 low. Strong support could be seen there to bring rebound, and above 0.816 support turned resistance will turn intraday bias neutral first. However, firm break of 0.8038 will resume larger down trend. Next target will be 61.8% projection of 0.9200 to 0.8038 from 0.8475 at 0.7757.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8696) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Asia-Pacific equities slumped today after Israel launched a military strike on Iran, targeting nuclear facilities and escalating geopolitical tensions in the region. The strike, which came without US support, was followed by a sharp vow of retaliation from Tehran. The immediate reaction saw oil prices spike nearly 9%, as traders rushed to price in potential supply disruptions across the Middle East. The risk-off mood gripped markets across asset classes, dragging equities lower and boosting safe havens.

Gold, Swiss Franc, and Yen all climbed as investors sought shelter from the rising uncertainty. Meanwhile, Dollar also found some renewed strength as it recovered, after broader weakness earlier in the week triggered by softer-than-expected inflation data and rising odds of a September Fed rate cut.

On the other hand, Kiwi led the declines, pressured by both heightened risk aversion and a sharp contraction in local manufacturing activity. Kiwi was followed closely by Aussie and Sterling. Loonie managed to hold mid-pack, underpinned partially by the surge in oil prices. Euro also traded with relative calm, despite the Middle East tensions, as ECB’s message this week has helped anchor expectations that easing cycle may be drawing to a close.

Technically, NZD/USD's upside momentum has been rather week with the choppy rise from 0.5845. Firm break of 0.6005 support should confirm short term topping. It would be a bit early to conclude the that rally from 0.5484 has completed. But even as correction, fall from 0.6079 would extend to 0.5845 cluster support (38.2% retracement of 0.5484 to 0.6079 at 0.5852).

In Asia, at the time of writing, Nikkei is down -1.15%. Hong Kong HSI is down -0.98%. China Shanghai SSE is down -0.83%. Singapore Strait Times is down -0.45%. Japan 10-year JGB yield is down -0.05 at 1.41. Overnight, DOW rose 0.24%. S&P 500 rose 0.38%. NASDAQ rose 0.24%. 10-year yield fell -0.055 to 4.357.

Looking ahead, Eurozone industrial production and trade balance are the main features in European session. Later in the day, Canada will release manufacturing sales and wholesale sales. US will publish U of Michigan consumer sentiment.

NZ BNZ manufacturing fall to 47.5, slumps back into contraction

New Zealand’s manufacturing sector slipped sharply back into contraction in May, with the BusinessNZ Performance of Manufacturing Index plunging from 53.3 to 47.5. The reading not only marks a decisive reversal from April's expansion but also sits well below the historical average of 52.5.

Key components of the index showed broad-based weakness: production dropped from 53.0 to 48.7, employment tumbled from 54.6 to 45.7, and new orders fell sharply from 50.8 to 45.3—all signaling deteriorating activity across the sector.

The sharp decline was echoed in business sentiment, with 64.5% of survey respondents offering negative comments—up from 58% in April. The commentary reflects a growing sense of pessimism as manufacturers grapple with falling demand, weak forward orders, and subdued consumer spending. Rising input costs, ongoing economic uncertainty, and stalled investment plans are compounding pressures.

BNZ’s Senior Economist Doug Steel said that “the New Zealand economy can claw its way forward over the course of 2025, but the PMI is yet another indicator that suggests an increased risk that the bounce in GDP reported for Q4, 2024 and Q1, 2025 could come to a grinding halt”.

WTI oil soars on Israel-Iran escalation, but resistance looms near 78

Crude oil prices surged sharply following news that Israel had launched direct airstrikes against Iran, targeting its nuclear and ballistic missile infrastructure. WTI crude is now trading more than 30% above its April low of 55.20, as geopolitical tensions in the Middle East reignite supply risk concerns.

Israeli Prime Minister Benjamin Netanyahu confirmed that the military had struck Iran’s Natanz enrichment site, leading nuclear scientists, and the core of its missile program, vowing to continue operations “for as many days as it takes to remove this threat.”

The military action was carried out without coordination with Washington. US Secretary of State Marco Rubio emphasized that Israel acted unilaterally and that the US was not involved in the strikes.

Technically, despite the sharp rally in WTI oil, strong resistance is expected between 74.65 and 78.08 to limit upside 161.8% projection of 55.63 to 64.60 from 60.14. at 74.65 and 200% projection at 78.08), on overbought condition. Break of 69.11 resistance turned support would indicate that the current buying wave has likely peaked.

Still, the path forward depends heavily on how geopolitical events unfold. Should the conflict escalate further or draw in regional actors, a break above the resistance zone could open the door to a test of 81.01, a level that marks the potential start of a broader bullish reversal in the longer-term oil trend.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.8067; (P) 0.8138; (R1) 0.8174; More….

Intraday bias in USD/CHF remains on the downside, with immediate focus now on 0.8038 low. Strong support could be seen there to bring rebound, and above 0.816 support turned resistance will turn intraday bias neutral first. However, firm break of 0.8038 will resume larger down trend. Next target will be 61.8% projection of 0.9200 to 0.8038 from 0.8475 at 0.7757.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8696) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Key insights from the week that was.

In Australia, the Westpac-MI Consumer Sentiment index posted a slight increase of 0.5% in June. At 92.6, the headline index remains well above the deep lows over 2022-24, but still some way below the neutral threshold of 100, consistent with a degree of ‘cautious pessimism’. Offshore developments are still weighing on consumer’s minds, with 77% of respondents recalling news on the topic as ‘unfavourable’. While the lower-inflation environment has certainly aided sentiment, the real per capita income decline of recent years means consumers remain hesitant to increase discretionary spending. Indeed, views on family finances versus a year ago and expectations for the year-ahead remain almost 14% and 7% below their respective long-run averages; meanwhile, the ‘time to buy a major household item’ sub-index is still 19% below its long-run average.

It is also notable that the more constructive outlook for inflation has seen consumers become more confident in the prospects for interest rate cuts – a sentiment we share. This week, we revised down our forecasts for inflation, incorporating a faster unwind of population growth in the near-term and downside risks to activity; we now expect underlying (trimmed mean) inflation to fall below the mid-point of the target band for a time. As discussed by Chief Economist Luci Ellis, these developments are likely to see the RBA’s policy easing cycle extend into the first half of 2026, seeing the cash rate trough at the lower end of our estimate of the neutral range at 2.85%.

Emphasising the downside risks to activity growth, the latest NAB business survey was weak. The business conditions index, having been trapped in a consistent downtrend for the past three years, fell to 0 in May. This is the weakest reading since the pandemic and suggests private demand may remain on a shaky footing through mid-year. Encouragingly, Australian businesses seem broadly unphased by offshore developments. Although, with the confidence index hovering around a neutral level of 0, the survey is hardly signalling a near-term rally in economic activity.

In the US meanwhile, both the CPI and PPI came in under expectations in May. Headline and core consumer prices rose 0.1% in the month, leaving the annual rates little changed at 2.4%yr for headline and 2.8%yr for core. The downward pressure in the month came from easing energy and services prices, while core goods prices were flat. The PPI also underperformed, rising just 0.1% following an upwardly revised -0.2% result in April. On an annual basis, PPI inflation rose 2.6% while the ex. food and energy measure gained 3.0%. Given how quickly the tariffs were walked back, it isn’t surprising there was little evidence of trade policy impacting prices for US consumers and businesses. Weakening consumer demand and an aggressive pull-forward of inventory stocking before May’s announcement are additional reasons to suspect that the tariff effect for inflation will be slow to come through, particularly at the consumer level.

Across the pond, UK labour market figures also came in softer than anticipated. The unemployment rate for April ticked up slightly to 4.6% but remains below the BoE’s forecast of 4.75% for the year. Wages growth also decelerated to 5.3%yr from a revised 5.6%yr, consistent with other indicators such as the Decision Maker Panel which points to a further deceleration in the year ahead. These developments jar with the recent acceleration in the CPI, making the BoE’s task of balancing growth and inflation difficult. Recall that at its last meeting, the committee was split three ways, with the decision to cut only narrowly winning. Another CPI print is due next week, but more than likely it will again point to sustained risks for inflation and consequently the need for a gradual approach to policy easing.

Finally to China. There, prices continued to decline, the CPI down 0.1%yr in May and the PPI 3.3%yr lower. These results reflect the ongoing expansion of excess capacity across the economy and soft consumer demand. Chinese trade data in the week also revealed a moderation in exports growth to 4.8%yr as exports to the US jolted lower; however, imports declining by 3.4%yr, keeping the trade surplus near record levels at USD103bn.

The USDCHF currency pair has been declining since its peak on May 13, 2025. It follows a pattern that technical analysts identify as an impulsive wave with an extended structure, often referred to as a “nest.” This analysis tracks the pair’s movement through a series of waves, as observed on the 1-hour chart. It provides insight into its short-term trajectory and potential future movements.

Starting from the May 13 high, the initial decline, labeled wave 1, concluded at 0.8184. This was followed by a corrective rally in wave 2, which peaked at 0.8347. From there, the pair resumed its downward trend in wave 3. The wave 3 has unfolded with further subdivisions, forming another impulsive pattern in a lesser degree. Specifically, from the wave 2 high, the first sub-wave (i) ended at 0.8312, followed by a brief rally in wave (ii) to 0.8338. The pair then extended lower in wave (iii), reaching 0.8195, before a corrective wave (iv) rallied to 0.8249. The subsequent decline in wave (v) completed at 0.8153, finalizing wave ((i)) of the larger structure.

Following this, a recovery rally in wave ((ii)) reached 0.8250 before the pair turned lower again in wave ((iii)). Within this segment, the first sub-wave (i) ended at 0.8167, and a corrective wave (ii) rallied to 0.8248. In the near term, as long as the pair remains below 0.8250, any rallies are expected to fail after 3, 7, or 11 swings, with the pair likely to extend lower. This analysis suggests continued bearish momentum, with traders advised to monitor key levels for confirmation of further downside.

USDCHF 60-Minute Elliott Wave Technical Chart

USDCHF Elliott Wave Technical Video

https://www.youtube.com/watch?v=24B8HFTaLW0

Crude oil prices surged sharply following news that Israel had launched direct airstrikes against Iran, targeting its nuclear and ballistic missile infrastructure. WTI crude is now trading more than 30% above its April low of 55.20, as geopolitical tensions in the Middle East reignite supply risk concerns.

Israeli Prime Minister Benjamin Netanyahu confirmed that the military had struck Iran’s Natanz enrichment site, leading nuclear scientists, and the core of its missile program, vowing to continue operations “for as many days as it takes to remove this threat.”

The military action was carried out without coordination with Washington. US Secretary of State Marco Rubio emphasized that Israel acted unilaterally and that the US was not involved in the strikes.

Technically, despite the sharp rally in WTI oil, strong resistance is expected between 74.65 and 78.08 to limit upside 161.8% projection of 55.63 to 64.60 from 60.14. at 74.65 and 200% projection at 78.08), on overbought condition. Break of 69.11 resistance turned support would indicate that the current buying wave has likely peaked.

Still, the path forward depends heavily on how geopolitical events unfold. Should the conflict escalate further or draw in regional actors, a break above the resistance zone could open the door to a test of 81.01, a level that marks the potential start of a broader bullish reversal in the longer-term oil trend.

New Zealand’s manufacturing sector slipped sharply back into contraction in May, with the BusinessNZ Performance of Manufacturing Index plunging from 53.3 to 47.5. The reading not only marks a decisive reversal from April's expansion but also sits well below the historical average of 52.5.

Key components of the index showed broad-based weakness: production dropped from 53.0 to 48.7, employment tumbled from 54.6 to 45.7, and new orders fell sharply from 50.8 to 45.3—all signaling deteriorating activity across the sector.

The sharp decline was echoed in business sentiment, with 64.5% of survey respondents offering negative comments—up from 58% in April. The commentary reflects a growing sense of pessimism as manufacturers grapple with falling demand, weak forward orders, and subdued consumer spending. Rising input costs, ongoing economic uncertainty, and stalled investment plans are compounding pressures.

BNZ’s Senior Economist Doug Steel said that “the New Zealand economy can claw its way forward over the course of 2025, but the PMI is yet another indicator that suggests an increased risk that the bounce in GDP reported for Q4, 2024 and Q1, 2025 could come to a grinding halt”.

Full NZ BNZ PMI release here.