- NZD/USD gains momentum to near 0.5750 in Wednesday’s early European session.
- Upbeat Chinese Services PMI data and less dovish-than-expected stance from the RBNZ support the New Zealand Dollar.
- US ADP Employment Change and ISM Services PMI reports will be in the spotlight later on Wednesday.
The NZD/USD pair attracts some buyers to around 0.5750 during the early European session on Wednesday. The upbeat Chinese economic data provides some support to the China-proxy Kiwi against the US Dollar (USD). The attention will shift to the release of the US ADP Employment Change and ISM Services Purchasing Managers Index (PMI) data later on Wednesday.
China’s Services PMI declined to 52.1 in November versus 52.6 prior, according to RatingDog on Wednesday. This reading came in stronger than the market expectations of 52.0. The upbeat Chinese economic data could underpin the New Zealand Dollar (NZD), as China is a major trading partner for New Zealand.
The Reserve Bank of New Zealand (RBNZ) lowered its Official Cash Rate (OCR) by 25 basis points (bps) to 2.25% last week, as widely anticipated. The New Zealand central bank signaled that future rate changes will depend on the economic and inflation outlook, and analysts believe the rate-cutting cycle is likely finished for now. This, in turn, might contribute to the NZD’s upside.
Meanwhile, traders increase their bets on the Federal Reserve (Fed) interest rate reduction this month due to weaker US economic data, cooling labour market, and dovish comments from Fed policymakers. Fed funds futures traders are now pricing in nearly an 89% odds of a rate cut at the conclusion of the Fed’s December 9-10 meeting, up from a 71% chance a week ago, according to the CME FedWatch Tool.
Fed officials will enter a quiet period ahead of the Fed meeting. Traders await the upcoming US economic data for fresh impetus. The US ADP Employment Change and ISM Services PMI reports on Wednesday could offer some hints about the labor market and the US interest rate path. If the reports come in stronger than expected, this might help limit the Greenback’s losses in the near term.
