NZD/USD Rises To Three-Month High Above 0.6200 On Fed Rate Cut Bets

NZD/USD extended gains to a three-month high near 0.6205 in early Asian trading on Thursday. USD/NZD was dragged lower as investors began pricing in two rate cuts from the Federal Reserve (Fed) this year. Weekly U.S. jobless claims are due on Thursday ahead of Friday’s closely watched U.S. nonfarm payrolls (NFP) data.

The U.S. dollar’s (USD) recovery was short-lived despite stronger-than-expected U.S. ISM services purchasing managers’ index (PMI) data for May. The services PMI rose to 53.8 from 49.4 in April, better than the expected reading of 50.8.

Recent weakness in U.S. GDP and signs of more labor market slack have led to increased bets on a rate cut from the Federal Reserve (FED), which could weigh on the dollar in the short term. A Reuters poll showed that most forecasters believe the Fed is likely to cut its key interest rate in September and once more this year. The Chicago Mercantile Exchange’s FedWatch tool shows that traders currently believe that the probability of the Fed cutting interest rates in September is about 70%.

On the New Zealand dollar side, China’s economic data is positive, providing some support for the New Zealand dollar as China is New Zealand’s largest trading partner. On Wednesday, the latest data released by Caixin showed that China’s service purchasing managers’ index in May rose to 54.0 from 52.5 in April, significantly exceeding the expected value of 52.6.

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