NZD/USD hovers around 0.5650 following labor market data, China’s Services PMI

NZD/USD remains silent following the release of domestic employment figures on Wednesday.
China's Services PMI dropped to 51.0 in January from 52.2 in December, falling short of the expected 52.3.
Traders anticipate Friday’s US Nonfarm Payrolls (NFP), which is expected to show a slight slowdown in job growth for January.

Akhtar Faruqui FXStreet

NZD/USD remains steady following the release of the Caixin Services Purchasing Managers’ Index (PMI) from China, New Zealand’s close trading partner. The New Zealand Dollar (NZD) also avoided to react on the domestic labor market data. The pair trades around 0.5650 during the Asian hours on Wednesday.

China's Services PMI unexpectedly fell to 51.0 in January from 52.2 in December. The data surprised to the downside, missing the estimated 52.3 figure.

New Zealand's Unemployment Rate climbed to 5.1% in Q4 2024, up from 4.8% in the previous period, in line with market expectations and reaching its highest level since September 2020. The Employment Rate edged down to 67.4% from 67.7%, while the underutilization rate increased slightly to 12.1% from 11.6% in the previous quarter.

The New Zealand Dollar (NZD) could struggle due to a risk-off sentiment following rising fears over US-China trade tensions. China retaliated against the new 10% US tariff that took effect on Tuesday. However, Trump stated on Monday afternoon that he would likely speak with China. He also warned, "If we can't reach a deal with China, the tariffs will be very, very substantial." However, no further update is available.

China’s Commerce Ministry announced that it will impose a 15% tariff on US coal and liquefied natural gas (LNG) imports, along with an additional 10% tariff on crude Oil, farm equipment, and certain automobiles. Additionally, to "safeguard national security interests," China is implementing export controls on tungsten, tellurium, ruthenium, molybdenum, and related products.

The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, remains under downward pressure for the third successive day, trading around 108.00 at the time of writing. Meanwhile, traders brace for Friday’s US Nonfarm Payrolls (NFP) data, which is expected to shape the Federal Reserve’s (Fed) monetary policy direction.

Economic Indicator

Caixin Services PMI

The Caixin Services Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s services sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for CNY.

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