NZD/USD treads waters below 0.5900, US ISM Services PMI eyed

• NZD/USD struggles to approach 0.5900 ahead of the US PMI releases.
• Fed is expected to increase another 25 basis points rate hike by the end of 2023.
• US-China trade tension exerts downward pressure on the New Zealand Dollar (NZD).

NZD/USD grapples to snap the losing streak that began on Friday, holding grounds near 0.5880 during the European session on Wednesday. The strength in the US Dollar (USD) weighed on the pair as market participants anticipate the Federal Reserve (Fed) to keep interest rates at a higher level for a prolonged period.

Furthermore, the markets are pricing in the possibility of a 25 basis points (bps) rate hike by the end of 2023. This hawkish outlook continues to underpin the yields on the US Treasury bonds, which provides confidence to the Greenback’s buyers.

The resurgence of trade tensions between the US and China could potentially reinforce the fears over China’s gloomy economic outlook. US Commerce Secretary Gina Raimondo anticipates that there will be no revisions to the US tariffs on China, which were imposed during Trump's administration until the ongoing review by the US Treasury Office is completed.

Given the close trade relationship between China and New Zealand, this situation may potentially exert downward pressure on the New Zealand Dollar (NZD) due to its susceptibility to developments in the Chinese economy.

US Dollar Index (DXY), which measures the value of the US Dollar (USD) against the six other major currencies, hovers around 104.70 at the time of writing. The yield on the 10-year US Treasury bond rose to 4.26%, up by 1.90%, which is contributing the support in underpinning the US Dollar (USD).

Investors will closely monitor the forthcoming economic data from the United States (US). The release of the US ISM Services PMI for August and the US S&P Global PMIs later in the North American session will be significant. These data releases will provide valuable insights into the current economic conditions in the United States and could potentially offer a clearer direction for the NZD/JPY currency pair.