- NZD/USD edges higher for the second straight day, albeit lacks follow-through buying.
- Markets react little to the disappointing release of China’s Caixin Services PMI for June.
- The focus remains on FOMC meeting minutes for cues about the Fed’s rate-cut path.
The NZD/USD pair builds on the previous day's goodish rebound from the 0.6050-0.6045 area, or its lowest level since mid-May and attracts some follow-through buyers for the second successive day on Wednesday. Spot prices stick to modest intraday gains following the release of softer Chinese data, albeit lack bullish conviction and remain below the 50-day Simple Moving Average (SMA) support breakpoint.
According to the latest data released by Caixin, China's Services PMI fell from 54.0 in May to 51.2 in June as compared to the market forecast for a reading of 53.4. This adds to worries about a slowdown in the world's second-largest economy and acts as a headwind for antipodean currencies, including the Kiwi. Apart from this, expectations that the Reserve Bank of New Zealand (RBNZ) will cut rates earlier than projected further contribute to keeping a lid on any meaningful appreciating move for the NZD/USD pair.
Meanwhile, the US Dollar (USD) struggles to gain any meaningful traction amid growing acceptance that the Federal Reserve (Fed) will begin its rate-cutting cycle later this year. The bets were reaffirmed by relatively dovish remarks by Fed Chair Jerome Powell on Tuesday, saying the US economy has made significant progress on inflation and is back on the disinflationary path. This, along with retreating US Treasury bond yields, fails to lure the USD bulls and should continue to act as a tailwind for the NZD/USD pair.
Market participants now look forward to the US economic docket, featuring the release of the ADP report on private-sector employment and the ISM Services PMI. The focus, however, will remain glued to the FOMC meeting minutes, which, along with the closely-watched US Nonfarm Payrolls (NFP) report on Friday, will influence market expectations about the Fed's rate-cut path. This, in turn, should drive the USD demand in the near term and help determine the next leg of a directional move for the NZD/USD pair.
Economic Indicator
Caixin Services PMI
The Caixin Services Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s services sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for CNY.
Read more.Last release: Wed Jul 03, 2024 01:45
Frequency: Monthly
Actual: 51.2
Consensus: 53.4
Previous: 54
Source: IHS Markit
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