The NZD/USD pair continued its upward trend for the third consecutive session, trading around 0.6120 during European trading hours on Thursday. This momentum is primarily driven by a weakening US Dollar, spurred by softer economic data from the United States, which has fueled speculation about potential interest rate cuts by the Federal Reserve in 2024.
Recent data indicates a sharp decline in the US ISM Services PMI, which fell to 48.8 in June, marking its steepest drop since April 2020 and significantly missing market expectations of 52.5. This follows a reading of 53.8 in May. Additionally, the ADP Employment report revealed that US private businesses added only 150,000 jobs in June, the lowest increase in five months and below the anticipated 160,000, as well as the revised figure of 157,000 for May.
Comments from Federal Reserve officials have added to the market’s cautious outlook. Federal Reserve Bank of Chicago President Austan Goolsbee noted on BBC Radio that achieving the 2% inflation target will take time and require more economic data. Conversely, Fed Chair Jerome Powell stated on Tuesday that the central bank is moving back towards a disinflationary path, as reported by Reuters.
In New Zealand, attention is turning to the upcoming interest rate decision by the Reserve Bank of New Zealand (RBNZ) next week. The RBNZ has kept borrowing costs steady at 5.5% for seven consecutive meetings since May. Traders will closely analyze the Monetary Policy Statement following the rate decision for further insights.
However, the New Zealand Dollar may face challenges due to economic data from China, a key trading partner. The Caixin Services Purchasing Managers’ Index (PMI) for China fell to 51.2 in June from 54.0 in May, missing market forecasts of 53.4.
Overall, the NZD/USD’s current gains are supported by the relative weakness in the US Dollar, but future movements will heavily depend on both domestic and international economic developments, particularly the upcoming RBNZ decision and ongoing economic data from the US and China.
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