NZD/USD gains traction below 0.6000, investors await the US PCE

• NZD/USD rebounds to 0.5977 amid a decline of the US Dollar.
• US real Gross Domestic Product (GDP) grew at an annual rate of 2.1% in Q2, as expected.
• New Zealand’s Roy Morgan Consumer Confidence for September came in at 86.4 vs. 85.0 prior.
• The US consumer inflation data will be a closely watched event.

The NZD/USD pair gains traction above the mid-0.5900s during the early Asian session on Friday. The rebound of the pair is supported by a correction of the US Dollar (USD) and lower US Treasury yields. Meanwhile, the US Dollar Index (DXY) edges lower to 106.10 after retreating from 106.83, the highest since November. NZD/USD currently trades bear 0.5977, gaining 0.28% for the day.

The US Bureau of Economic Analysis (BEA) reported on Thursday that Real Gross Domestic Product (GDP) in the US expanded at an annual rate of 2.1% in the second quarter (Q2), as expected. Additionally, the US Department of Labor revealed that the Initial Jobless Claims for the week ending of September 22 climbed to 204K from 202K in the previous week, below the 215K anticipated. The Pending Home Sales fell 7.1% MoM in August, compared to expectation for a 1.0% drop MoM.

Earlier Friday, Federal Reserve Bank of Richmond President Thomas Barkin stated that the Fed holding steady at the September FOMC meeting was appropriate and Fed has time to see data before deciding what’s next for rates. On Thursday, Chicago Fed President Austan Goolsbee said the central bank will return inflation to target and has a chance to do something rare by accomplishing that without a recession. Richmond Fed President Thomas Barkin remarked that the past five months of inflation data have been upbeat but that it is too early to determine what monetary policy would be next. Barkin mentioned that lost data due to the government shutdown would complicate understanding the economy.

Investors will assess the narrative of a higher for longer rate in the US against the growth risks posed by the possibility of an imminent US government shutdown. This, in turn, might cap the upside of the Greenback and act as a tailwind for the NZD/USD pair.

On the Kiwi front, the latest data on Friday from the ANZ reported that New Zealand’s Roy Morgan Consumer Confidence for September came in at 86.4 from 85.0 in the previous reading. Earlier, ANZ Business Confidence for September rose to 1.5 from a 3.7 decline in August while the ANZ Activity Outlook improved to 10.9 in September from 11.2% in the previous reading. The market anticipates the Reserve Bank of New Zealand (RBNZ) to maintain the current monetary policy unchanged in next week’s policy meeting, which might limit the Kiwi’s upside.

Market players will focus on the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of consumer inflation due later on Friday. The annual consumer inflation for August is expected to decline from 4.2% YoY to 3.9%. These figures could give a clear direction for the NZD/USD pair.