The NZD/USD pair is seeing support from a weaker US Dollar and a positive risk sentiment. However, uncertainty over a Fed rate cut is expected to limit USD losses and prevent significant gains for the pair. Traders are advised to be cautious as China’s economic struggles could impact bullish trading.
The recent US Personal Consumption Expenditures (PCE) Price Index data confirmed a disinflationary trend, leading to expectations of a rate cut by the Fed in September. Despite this, the Fed remains cautious and has forecasted only one rate cut in 2024. Additionally, concerns over President Biden’s debate performance and the possibility of a Trump presidency could lead to aggressive tariff impositions, which may fuel inflation and higher rates, supporting US Treasury bond yields and limiting USD losses.
Furthermore, expectations of an earlier rate cut by the Reserve Bank of New Zealand (RBNZ) and China’s economic challenges may deter bullish traders from making new bets on the NZD/USD pair. Data from China showing a decline in manufacturing and services activities adds to the cautious sentiment in the market.
Looking ahead, traders are closely watching important US macro releases, particularly the ISM Manufacturing PMI and the Nonfarm Payrolls (NFP) report later in the week. These reports will influence short-term price dynamics of the USD and impact the NZD/USD pair. It is important to stay updated on these developments for informed trading decisions.