The New Zealand Dollar (NZD) continues to dominate the major currencies, defying expectations without a clear driver, while speculations regarding China’s economy receiving further stimulus persist.
Traders are on edge as they await the upcoming US Federal Reserve monetary policy decision to be revealed on Wednesday. The NZD/USD pair is currently trading at 0.6191 after hitting a daily low of 0.6155.
The market sentiment is mixed, with Wall Street showing a positive tone upon opening. Simultaneously, European bourses are beginning to recover from disappointing Eurozone (EU) and UK PMI Manufacturing data, which suggests a potential global economic slowdown and a shift in central bank tightening intentions.
The recent US S&P Global PMI data displayed a decent improvement in Manufacturing activity, surpassing expectations by rising from 46.3 to 49. However, Services PMI dipped to 52.4 from June’s 54.4, falling below the forecast of 54.
Consequently, the Composite PMI index declined to 52 in July from 53.2 in June. Despite this data, the US Dollar (USD) failed to gain against the NZD, which remained strong throughout the day.
Nonetheless, the greenback remains higher overall, as evident from the US Dollar Index (DXY), tracking the USD’s performance against a basket of currencies—except for the NZD, which increased by 0.22% to 101.305, primarily due to the US Treasury bond yields’ short-end movements.
In New Zealand, the day’s agenda remained empty, leaving traders focused on China and the US. China’s top leaders signaled the possibility of more stimulus measures as they face the risk of missing their projected 5% growth for 2023.
The upcoming decision from the Federal Reserve and Chair Jerome Powell’s press conference will significantly impact the direction of currency pairs.
A 25 bps rate hike is highly likely, and investors eagerly anticipate the tone of the statement and Powell’s remarks, searching for signs of hawkish or dovish sentiments, which will guide the NZD/USD accordingly.
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