NZD/USD Gets A Boost As USD Shows Weakness After PMI
During Wednesday's trading session, the Kiwi pair received a bullish boost after the release of the S&P PMI data for August. The US PMI was not in line with expectations and was even lower than last month's readings.
As a result, the NZD gained the upper hand over the USD and thus pushed the NZD/USD pair to 5-day highs. The US PMI data showed the bigger picture of a softening in the US economy, which also affected the yields of the US bonds.
Overall, the market believes less in an aggressive Fed when compared with a few days ago (before the release of the PMI). Now, the investors will tune in to hear what Jerome Powell has to say to get hints about the interest rate policy.
US PMI Surprised The Market
From an expected reading of 49.3 to an actual reading of 47.00, the data took the markets by surprise and even dented the US Dollar index.
If we look back, the Fed made it clear that any decision regarding the interest rate will depend on the economic data. Now that we have a weak PMI at our hands, the markets believe that the Fed can no longer afford to be as aggressive as it was in the last. After all, even the yields of the US bonds are falling after the recent results of the PMI.
That's why the odds for a September rate by the Fed now stand at nearly zero while November is hovering near 35%. In short, the prospects of any further rate hike this year are now looking slim after the data.
The NZD/USD daily chart is showing a neutral-bullish picture with a high chance of the bulls gaining the upper hand. The RSI indicator tells us that the bulls are gaining steam, while the MACD is also showing that the bears are losing control.