NZD/USD extends its downside below the mid-0.5900s, investors await RBNZ rate decision
|- NZD/USD attracts some sellers near 0.5938 amid the USD demand.
- US ISM Manufacturing PMI (Sep) came in at 49.0 vs. 47.6 prior, stronger than expected.
- The Reserve Bank of New Zealand (RBNZ) is likely to hold the interest rate unchanged at 5.5% on Wednesday.
The NZD/USD pair remains under selling pressure below the mid-0.5900s after falling to hold above the 0.6000 barrier during the early Asian trading hours on Tuesday. The rally of the US Dollar (USD) and higher US Treasury yield weigh on the Kiwi. The pair currently trades around 0.5938, down 0.13% on the day.
The Institute for Supply Management (ISM) showed on Monday that business conditions in the US manufacturing sector continued to contract in September. The US ISM Manufacturing PMI came in at 49.0 in September from 47.6 in August, beating the market expectation of 47.7. Furthermore, the Prices Paid Index fell from 48.4 to 43.8. The Employment Index climbed from 48.4 to 51.2. Finally, the New Orders Index grew from 46.8 to 49.2.
Earlier Tuesday, Federal Reserve (Fed) Bank of Cleveland President Loretta Mester said that the Fed will likely need to hike rates one more time this year and monetary policy path will depend on how the economy performs. Additionally, Fed Governor Michelle Bowman said on Monday that it will likely be appropriate to raise the policy rate further and hold it at restrictive levels for some time.
Meanwhile, Fed Vice Chair for Supervision Michael Barr stated that the central bank should approach monetary policy with caution. He said the most important question is not how much interest rates will rise, but how long they will remain at a sufficiently restrictive level. That said, the upbeat US economic data and the hawkish remarks from most Fed officials lift the US Dollar (USD) and act as a headwind for the NZD/USD pair.
On the Kiwi front, the Reserve Bank of New Zealand (RBNZ) will announce its interest rate decision on Wednesday. Markets expect the RBNZ to hold rates unchanged at 5.5%. However, traders will keep an eye on the statement following the meeting. Any hint about a further rate hike might limit the downside of the Kiwi.
Moving on, the Reserve Bank of New Zealand (RBNZ) monetary policy meeting on Wednesday will be in the spotlight. On the US docket, the focus will be the US employment data, with the release of the ADP report on Wednesday and the Nonfarm Payrolls on Friday.
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