NZD/USD refreshes two-week high above 0.6200 as US Dollar extends downside, US NFP eyed

• NZD/USD has climbed sharply to 0.6215 amid a sheer sell-off in the USD index.
• US corporate earnings are expected to remain uncertain amid higher interest rates.
• Going forward, US Employment and Services PMI data will be keenly watched.

The NZD/USD pair has printed a fresh two-week high at 0.6215 in the London session. The Kiwi asset has picked significant strength amid sheer weakness in the US Dollar Index (DXY). The USD Index has cracked sharply to near 103.10 as investors are getting cautious ahead of the Employment and Services PMI data.

Sell-off has been extended by the S&P500 futures are investors have been sidelined ahead of the second-quarter result season. Corporate earnings are expected to remain uncertain amid higher interest rates and tight credit conditions by commercial banks.

The release of the Federal Open Market Committee (FOMC) minutes showed that policymakers are worried that the economy faced headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, al­though the extent of this effect remained uncertain.

Going forward, US Nonfarm Payrolls (NFP) data will be keenly watched. The Unemployment Rate is expected to drop to 3.6% vs. the former release of 3.7%. While Nonfarm Payrolls (NFP) report for June is expected to show fresh 225K payrolls vs. the prior addition of 339K. Monthly Average Hourly Earnings are seen steady at 0.3%.

But before that, US ISM Services PMI will remain in focus. Unlike factory activities, US Services PMI is in expansion territory. The economic data is seen expanding to 51.0 vs. the former release of 50.3. While New Orders Index is seen declining to 53.3 against the prior release of 56.2.

On the New Zealand Dollar front, investors are worried that more interest rate hikes from the Reserve Bank of New Zealand (RBNZ) could falter the economic outlook. Economists at UOB cited that New Zealand has entered a technical recession, with the economy contracting by 0.1% q/q in 1Q23, in comparison to the revised 0.7% q/q fall in 4Q22 (-0.6% q/q previously). The reading was sharply below the Reserve Bank of New Zealand (RBNZ)’s projection for 0.3% growth.