NZD/USD below 0.6100 was the trend seen through initial European trading on Wednesday, prompted by revived US Dollar strength. The Kiwi fell to about 0.6085 as markets reacted to the strong US economic news and even more careful words from Federal Reserve officials. Now, attention will turn to the later release of the ADP Employment Change report.
An interestingly stronger labour market within the US may help to bolster the US Dollar further and put more pressure on the New Zealand Dollar. Currently, NZD/USD registers a risk-conscious tone with investors offsetting dovish central bank cues against hawkish US data.
US Data Boosts the Greenback
The Greenback got a major boost following the latest US JOLTS job openings data, which indicated an above-forecast figure for May. Job openings rose to 7.76 million in May from 7.395 million in April and were well above expectations of 7.3 million. The robust employment data indicates that the US economy is still solid in the face of higher interest rates and international headwinds.
This economic resilience has already spurred the US Dollar to gain strength, driving NZD/USD below 0.6100 after the brief rally. But dovish comments from Fed Chairman Jerome Powell are likely to cap the Dollar’s rally at least in the short term. Powell indicated rate cuts remain on the table this month, relying solely on future economic indicators.
RBNZ Expected to Maintain Rates Unchanged
Traders are also monitoring the Reserve Bank of New Zealand’s (RBNZ) July meeting, which takes place next week. The central bank is expected to leave its Official Cash Rate at 3.25%, after a 225 basis point cut. RBNZ policymakers feel that the current rate is in the neutral zone, and they now prefer to see the economic effects.
This wait-and-see strategy is viewed as dovish by markets, potentially capping upside potential for the New Zealand Dollar. However, any surprise from the RBNZ, particularly on inflation or employment commentary, has the potential to induce fresh volatility. Meanwhile, NZD remains on the back foot due to a lack of tightening bias, particularly with US data still beating forecasts.
Market Focus on the US ADP Jobs Report
All attention is now focused on the US ADP Employment Change report, which is poised to have an impact on near-term NZD/USD direction. The report gauges private-sector jobs added and frequently serves as a guide to the official US Non-Farm Payrolls release. Upbeat readings may drive the US Dollar even higher and drive NZD/USD even lower below 0.6100 in the sessions ahead.
Weaker data may trigger a reversal of USD gains, particularly if accompanied by more dovish Fed comments this week. Then, the New Zealand Dollar may gain some lost ground, especially if risk appetite once again enters the markets. Until that time, however, NZD/USD is susceptible to economic releases and shifts in global perception.
External Pressures on the Kiwi
The NZD/USD below the 0.6100 level indicates not only domestic influences, but also China’s slowing economy and soft commodity demand. China is New Zealand’s biggest trading partner, and its slow recovery from lockdowns has damaged New Zealand’s export prospects. Sliding dairy prices have further depressed the Kiwi, as dairy is New Zealand’s top export commodity and economic engine.
A less hard Chinese economy translates to reduced demand for New Zealand commodities, piling pressure on the already beleaguered Kiwi. Risk appetite in broad markets is also at play, with investors wanting safe-haven currencies such as the US Dollar. Until China gives indications of stabilisation, the NZD can find it difficult to get sustained support even if the RBNZ remains resolute.
Also Read: Bitcoin Climbs as USD Weakens Amid Middle East Tensions
Key Drivers to Watch This Week
The NZD/USD below 0.6100 position may shift as several key factors unfold through the rest of the week.
Traders should watch for:
- US ADP Employment report release today
- RBNZ rate decision and policy tone next week
- Chinese trade and inflation data updates
- Dairy auction results and commodity trends
- Risk sentiment and geopolitical developments
Each of these events could impact the pair’s direction, especially as the Kiwi remains sensitive to shifts in global sentiment. Any evidence of US economic fragility or RBNZ policy shocks would play in favour of a Kiwi bounce from its current low levels. But if US data keeps on impressing, the New Zealand Dollar might be in for prolonged pressure in the short to medium term.
