The NZD/USD currency pair has declined to a one-week low following the announcement of weaker than anticipated Services PMI data from China. The combination of escalating trade tensions between the U.S. and China, along with a slight strengthening of the U.S. dollar, has further added to the pressures on the currency pair. Market participants are now closely monitoring an upcoming speech by the Federal Reserve Chair, seeking potential direction.
The NZD/USD pair faced renewed selling pressure during the Asian session, dropping more than 0.50% on the day to mid-0.5800s after a more stable price movement the previous day. Despite this downward trend, there was a slight recovery in the pair in the later part of the trading session.
The slowdown in China’s services sector, highlighted by the Caixin Services PMI falling from 52.0 to 51.5 in November, has raised concerns about the vulnerabilities facing the world’s second-largest economy. Coupled with recent U.S. export restrictions on China and apprehensions regarding possible tariffs from the incoming U.S. administration, the sentiment has turned negative for antipodean currencies, including the New Zealand dollar.
Conversely, the U.S. dollar has gained support from positive domestic economic reports, alleviating fears of a considerable slowdown in the labor market. Speculations that expansionary policies could lead to increased inflation suggest that the Federal Reserve might adopt a cautious approach regarding interest rate cuts. This persistent geopolitical uncertainty continues to bolster the dollar’s safe-haven status and applies further downward pressure on the NZD/USD pair.
However, despite the bullish stance on the dollar, investors appear hesitant to make significant moves ahead of the speech from the Federal Reserve Chair later in the day. Additionally, the forthcoming Nonfarm Payrolls report is anticipated to provide crucial insights into the Fed’s monetary policy trajectory, further influencing the USD’s short-term dynamics. The overall market environment indicates a likely continued decline for the NZD/USD pair.
