NZD/USD Rollercoaster Ride: NFP Data, ISM PMI, and the USD's ...

3. Sept. 2023

NZD/USD Rollercoaster Ride: NFP Data, ISM PMI, and the USD's Resilience"

In the world of forex trading, the NZD/USD pair recently embarked on a turbulent journey. It reached its zenith at a daily high of 0.6015 before a sharp descent to 0.5940. This price action was largely influenced by a medley of economic data and market sentiment.

Mixed Bag of US NFPs:
August's US Nonfarm Payrolls (NFPs) report painted a mixed picture. On the positive side, the headline NFPs exceeded expectations, with a tally of 187,000 jobs created, surpassing the projected 170,000. This figure also marked an improvement from the previous downwardly revised count of 157,000. However, the report held a sting in its tail as Average Hourly Earnings fell short, registering a modest 0.2% month-on-month (MoM) increase compared to the anticipated 0.3%. The labor market presented an unexpected twist as the unemployment rate unexpectedly climbed to 3.8%.

Manufacturing PMIs Beat Expectations:
On the other hand, the Institute for Supply Management (ISM) provided a glimmer of hope for the US economy in August. Manufacturing Purchasing Managers' Index (PMI) figures came in stronger than expected at 47.6, surpassing the consensus of 47, and showing improvement from the previous month's 46. This positive sentiment was echoed in the Employment index, which stood at 48.5, although it remained in contraction territory.

USD Resilience Amid Market Fluctuations:
Throughout this data-driven rollercoaster, the US dollar (USD) demonstrated resilience. The US Dollar Index (DXY), which measures the USD against a basket of major currencies, recorded daily gains by the end of the week. This was a noteworthy feat, considering the initial sell-off triggered by the mixed NFP report.

Market Speculation on Fed's Path:
Amidst these market dynamics, US Treasury yields mirrored the USD's movements. The fluctuation in yields indicated that market participants are reevaluating their expectations regarding the Federal Reserve's (Fed) future actions. It appears that investors are leaning towards a less aggressive stance by the Fed, with hopes that the tightening cycle may soon come to a close. The softness hinted at in the labor market data has fueled this speculation.

Looking Ahead: The Role of CPI:
As the dust settles from the NFP and ISM PMI releases, traders are setting their sights on September 13 when the US will unveil the August Consumer Price Index (CPI) figures. These numbers will play a pivotal role in shaping expectations for the next Fed decision. In an ever-changing economic landscape, traders are keeping a keen eye on these data points to anticipate market trends and make informed trading decisions.

Despite the turbulence witnessed in recent days, the NZD/USD pair is set to record a weekly gain of 0.70%, underscoring the resilience of forex markets in the face of economic fluctuations and uncertainty. As traders gear up for what lies ahead, the forex landscape remains a dynamic arena driven by data, sentiment, and the ever-evolving interplay of currencies on the global stage.