NZD/USD extends the downside to the vicinity of 0.5900, focus on Fed Chair Powell's speech

• NZD/USD trades lower around 0.5920 attributed to upbeat US employment data.
• US Dollar (USD) remains supported by the possibility of the Fed’s hawkish stance.
• US Initial Jobless Claims helped the US Dollar (USD) to gain momentum.

NZD/USD extends its losses, trading lower around 0.5920 during the Asian session on Friday. The pair experiences downward pressure due to upbeat United States (US) employment data released on Thursday. The US Initial Jobless Claims indicated positive employment conditions, which raises the concerns over inflation scenario in the US. For the week ending on August 18, the index dropped to 230K from the previous reading of 240K, which was expected to remain consistent.

The US Dollar (USD) remains supported by the expectations that the US Federal Reserve (Fed) will stick to its hawkish stance ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium. Furthermore, former St. Louis Federal Reserve President James Bullard said in an interview with Bloomberg, “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon”.

Meanwhile, Federal Reserve Bank of Philadelphia President Patrick Harker hinted at a potential conclusion to the rate hike path. Susan Collins, President of the Boston Federal Reserve, advocated for maintaining a bias towards keeping rates at higher levels for an extended duration.

The Chinese authorities have implemented modest interest rate cuts and stimulus measures, but these actions appear insufficient to restore market sentiment. The worsening economic situation in China is exerting pressure on the New Zealand Dollar (NZD) due to export-trade relations between the two countries. Market participants also expect that the Reserve Bank of New Zealand (RBNZ) will start reducing the Official Cash Rate (OCR) earlier than initially anticipated if China’s economic situation worsens further.

The US Dollar Index (DXY), which measures the performance of the Greenback against six major currencies, extends its gains and trades higher around 104.20. Market participants will closely monitor Fed Chair Powell’s speech, seeking insights into economic conditions and inflation outlook, which will influence the monetary policy in September’s meeting. This event could provide support in determining a clear understanding for placing fresh bets on the NZD/USD pair.