The NZD/USD pair retraces gains, trading around 0.5940 amidst increased risk aversion. This decline is due to the stronger US Dollar fueled by a rebound in US Treasury yields. Traders are cautious ahead of the release of ISM Manufacturing PMI and weekly Initial Jobless Claims from the US later today.
However, the downside for NZD/USD may be limited as the Fed hints at a potential rate cut in September. Fed Chair Jerome Powell mentioned that a rate cut is “on the table” during a press conference. The Fed is closely monitoring the labor market and signs of a downturn to guide its policy decisions.
On the other hand, the New Zealand Dollar faces pressure from weak data in China, its major trade partner. The Caixin Manufacturing PMI for July missed expectations, affecting NZD. Moreover, expectations of an RBNZ rate cut by October due to low inflation further weigh on the Kiwi.
Analysis:
The NZD/USD pair is declining due to increased risk aversion and a stronger US Dollar. The Fed’s hints at a rate cut in September are impacting market sentiment. Weak data from China and expectations of an RBNZ rate cut are adding pressure on the New Zealand Dollar. Traders should watch out for the upcoming economic data releases and central bank meetings to gauge the future movement of the currency pair.