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NZD/USD loses its recovery momentum around 0.5950

6 October 2023 Written by Feng Zhou  Senior Market Analyst Feng Zhou

The NZD/USD currency pair experienced a halt in its recovery momentum, with a noticeable decline to the 0.5950 mark as the week wrapped up on Friday. This trend shift was evident after the currency pair reached its intraday zenith of 0.5971 during the early trading hours in the European session. The financial markets exhibited a discernible sense of caution, primarily in anticipation of the forthcoming key US employment data, leading the pair to trade around 0.5950, marking a 0.25% dip for the day. The monetary pulse of New Zealand was set on Wednesday when the Reserve Bank of New Zealand (RBNZ) held its monetary policy meeting. As widely predicted by market analysts, the RBNZ chose to keep the Official Cash Rate (OCR) stable at 5.5%. Crucially, the central bank's statement emphasized that, in light of prevailing economic conditions, interest rates might necessitate a prolonged period of maintenance at these restrictive levels.

Shifting the lens to New Zealand's economic indicators, Thursday unveiled the ANZ Commodity Price data for September, which showed a rise of 1.3%. This is a noticeable recovery compared to the 2.9% contraction experienced previously. Additionally, New Zealand’s NZIER Business Confidence index for Q3 showcased a decline, falling to -52% on a quarterly basis, an improvement from its former reading of -63%.

In the United States, monetary policy strategists anticipate that the Federal Reserve (Fed) will persist with its inclination towards a ‘higher-for-longer’ interest rate regimen. A significant focal point for market participants is the US Nonfarm Payrolls data, which is awaited with bated breath to shed light on the prevailing labor market conditions. Current projections situate the Nonfarm Payrolls at a potential rise of 170K, while the Unemployment Rate could potentially see a reduction to 3.7%, down from its previous 3.8%. If these figures fall short of market expectations, the US dollar could face a sell-off, which might provide a boost to the NZD/USD pair.

Recent US data released on Thursday highlighted an improvement in the weekly Initial Jobless Claims for the week ending on September 30, registering at 207K, a slight improvement from the previous week's 205K. This figure also undercut market predictions, which stood at 210K. In terms of trade, the US recorded a trade deficit of $58.3B, a marked decrease from July's $64.7B and notably lower than the anticipated $62.3B.

Friday lacked substantial economic revelations from New Zealand's end. Consequently, the NZD/USD currency pair's trajectory seemed heavily influenced by the US dollar's performance. With the US Nonfarm Payrolls looming large, market volatility could be on the horizon. Moreover, key data, including the US Average Hourly Earnings for September and the Unemployment Rate, set to be unveiled on Friday, will likely play a pivotal role in dictating the future direction of the NZD/USD pair.

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