The NZD/USD pair retreated from its two-month highs, hovering around 0.6190 during the European trading session on Thursday. The US Dollar gained strength as US Treasury yields rose, but speculation of a potential interest rate cut by the US Federal Reserve in September could limit the Dollar’s gains, supporting the NZD/USD pair. Investors are eagerly awaiting key US employment data, including Average Hourly Earnings and Nonfarm Payrolls, set to be released on Friday.
Mixed economic data from the US on Wednesday fueled speculations of a Fed rate cut. The ISM US Services PMI surged to 53.8 in May, exceeding expectations and reaching its highest level in nine months. However, the ADP US Employment Change report showed a lower-than-expected increase of 152,000 new jobs in May, raising concerns and contributing to the likelihood of a rate cut in September.
A recent Reuters poll revealed that two-thirds of economists now anticipate a Fed rate cut in September. According to the CME FedWatch Tool, the probability of a rate cut in September by at least 25 basis points has risen to nearly 70.0%, up from 47.5% the previous week.
In New Zealand, the Kiwi Dollar found support from positive data released by Caixin, showing a rise in China’s Services PMI to 54.0 in May from 52.5 in April, surpassing market expectations. Investors are now cautious ahead of the upcoming export and import data from China, New Zealand’s key trading partner, for May.
New Zealand’s Finance Minister Nicola Willis stated that the 2024 budget will not prolong higher interest rates, despite concerns from economists that it could complicate the Reserve Bank of New Zealand’s efforts to combat inflation.