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- NZD/USD declines to around 0.5870 in Tuesday’s Asian session.
- Trump said the negotiations are Iran’s “last chance” to secure a deal to end the five-month conflict.
- New Zealand’s employment report will be in the spotlight later on Wednesday.
The NZD/USD pair loses traction to near 0.5870 during the Asian trading hours on Tuesday, pressured by stronger US economic data and safe-haven flows. Traders brace for New Zealand’s employment report, which will be published later on Wednesday.
Business activity in the US manufacturing sector expanded at an accelerating pace in July, with the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) climbing to 55.6 in July from 53.3 in June. This figure came in above the market consensus of 54.0.
Additionally, uncertainty surrounding US-Iran talks remains high, boosting a safe-haven currency such as the US Dollar (USD) against the New Zealand Dollar (NZD). US President Donald Trump said on Monday that he is giving Iran “every last chance” to reach a deal. Trump claimed that an agreement to reopen the Strait of Hormuz and denuclearize Tehran is “imminent.”
Nonetheless, Iranian officials denied participating in direct talks with the US, saying that they are negotiating with mediators in Oman.
New Zealand’s unemployment rate is expected to climb to 5.4% in the second quarter (Q2) from 5.3% in the previous reading. Any signs of improvement in New Zealand’s labor market could lift the Kiwi in the near term.
Analysts from ASB expect the Reserve Bank of New Zealand (RBNZ) to keep tightening toward a 3.25% year-end Official Cash Rate (OCR), while Westpac is forecasting hikes in September and December that would take the OCR to 3.75% within a year.
Kiwi support builds as RBNZ outlook firms on stronger labor signals
Strategists at Brown Brothers Harriman highlight that the recent “improvement in the ANZ Business employment intentions index to a five-month high in June points to more favorable labor market conditions.” They add that this firmer labor backdrop, combined with “above target inflation,” “argue for additional RBNZ rate hikes which is NZD supportive,” reinforcing the constructive policy and currency narrative around New Zealand.
