The NZD/USD pair is on a downward trend for the third consecutive session, trading around 0.6200 during the Asian trading hours on Tuesday. Traders are anticipating that the US Federal Reserve will not implement a 50 basis points rate cut in September, providing support to the US Dollar (USD).
Investors are eagerly awaiting the release of the US ISM Manufacturing PMI data later today, with a focus on upcoming US employment data, especially the August Nonfarm Payrolls (NFP), to gain further insights into the timing and scale of potential Fed rate cuts.
Despite the rise in US Treasury yields, which is bolstering the US Dollar, the currency’s gains may be limited by the growing expectations of a 25 basis point rate cut by the Fed in September. Market confidence, as indicated by the CME FedWatch Tool, shows that there is nearly a 70% certainty of at least a 25 basis point rate cut at the upcoming September meeting.
In New Zealand, the Terms of Trade Index saw a 2.1% quarter-on-quarter increase in Q2, rebounding from a 5.1% decline in the previous quarter and surpassing market expectations. Export prices experienced a notable 5.2% increase in the second quarter, while import prices also rose by 3.1%, indicating positive economic growth.
The NZX 50 Index in New Zealand is currently consolidating around 12,500, with traders closely monitoring global developments, including the recent July manufacturing PMI data from China. While official figures showed a contraction in factory activity, private surveys suggested expansion in the manufacturing sector, impacting trade relations with New Zealand.
Analysis:
The current market trends indicate a cautious approach by traders in response to potential Fed rate cuts and economic indicators from key trading partners like China. The rise in US Treasury yields and positive terms of trade in New Zealand are influencing currency movements and investor sentiment. It is crucial for investors to stay informed about economic data releases, central bank policies, and global market trends to make informed decisions about their investments.