New Zealand dollar rises as domestic data improves and China shows signs of recovery
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Daily Currency Update
The NZD/USD pair continues to build momentum, marking its third consecutive daily gain as it trades near the 0.5900 level during early European hours on Monday. The recent strength in the New Zealand dollar (NZD) comes amid a combination of improved domestic economic data and a more optimistic outlook for China’s manufacturing sector, which is boosting overall market sentiment. On the domestic front, New Zealand's seasonally adjusted Building Permits rose by 5.4% month-on-month in July, reversing the previous 6.0% decline. The rebound in building activity points to a tentative recovery in the construction sector, which had been under pressure due to high interest rates and elevated input costs. A pickup in permits may signal increased confidence among developers and could feed into broader economic resilience, offering the Reserve Bank of New Zealand (RBNZ) some relief as it navigates a challenging inflation-growth balance. In addition to domestic tailwinds, the NZD is drawing support from encouraging data out of China—New Zealand’s largest trading partner. A private-sector survey released Monday showed that China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) unexpectedly climbed into expansion territory in August, rising to 50.5 from 49.5 in July. The stronger-than-expected reading indicates a modest recovery in factory activity, driven by improved domestic demand and export orders. From a technical perspective, a sustained break above the 0.5900 handle could open the door for further upside toward key resistance levels, especially if risk sentiment continues to improve and upcoming US data supports a dovish Fed narrative. In the days ahead, traders will closely watch for additional Chinese economic indicators, as well as US macro data, including ISM services PMI and labor market figures, for further direction on the NZD/USD pair.Key Movers
The US Dollar Index (DXY) remains under pressure, trading lower for the fifth consecutive day as it probes critical support levels around 97.61/52. These levels have withstood multiple tests so far, providing solid technical support, but the dollar’s bearish momentum persists amid rising market expectations for a Federal Reserve rate cut in September. The latest dovish signals from Fed policymakers have further weakened the greenback’s appeal. Recent comments from two Fed officials emphasized a cautious outlook, reinforcing speculation that the central bank may pivot toward easing monetary policy sooner than previously anticipated. This shift in sentiment is compounded by recent political turbulence in Washington, including former President Trump’s controversial attempt to remove Fed Governor Christopher Waller and a court ruling declaring most of Trump’s tariffs illegal. These developments have added to the uncertainty weighing on the dollar. Despite the current softness, investors are expected to exercise caution ahead of key US economic data scheduled for release this week, particularly the August labor market report. This data will be closely scrutinized for clues on the health of the US economy and to gauge the Federal Reserve’s likely policy path at its upcoming September meeting. Recent labor market indicators have pointed to a notable slowdown in hiring and wage growth over the past few months—a trend that has become the Fed’s primary concern. Fed Chair Jerome Powell has indicated that while inflation remains elevated, it is likely a temporary phenomenon. The central bank’s ability to confidently shift from tightening to potentially easing policy will depend heavily on whether the labor market data supports a sustained cooling in economic activity. Overall, the dollar’s near-term direction hinges on these pivotal economic releases, as markets balance ongoing geopolitical risks and shifting expectations around US monetary policy.Expected Ranges
- NZD/USD: 0.5800 - 0.6000 ▲
- NZD/EUR: 0.4950 - 0.5150 ▲
- GBP/NZD: 2.2850 - 2.3050 ▼
- NZD/AUD: 1.1000 - 1.1200 ▼
- NZD/CAD: 0.8000 - 0.8200 ▲