NZD/USD eyes volatility contraction around 0.6350 as investors await Caixin PMI data

• NZD/USD is expected to display a rangebound structure as investors await Caixin PMI data for fresh cues.
• IMF sees CY2023 as a tough year as the United States, Europe, and China may deliver a decline in economic activities.
• The US Dollar Index may remain volatile ahead of ISM Manufacturing PMI data.

The NZD/USD pair is likely to remain sideways around 0.6350 ahead on Monday. The kiwi asset displayed wild gyration in the late New York session on Friday as investors eased their positions to go light for CY2023. The volatile moves are likely to be compromised from rangebound moves, which will result in lackluster performance by the kiwi asset for a short span of time.

S&P500 ended the CY2022 on a cautious note as the market participants remained dubious over projections for the performance of the equities domain of the United States. Managing Director Kristalina Georgieva of the International Monetary Fund (IMF) cited on the CBS Sunday morning news program that “For much of the global economy, 2023 is going to be a tough year as the main engines of global growth - the United States, Europe, and China – all may experience weakening activity,”.

The US Dollar Index (DXY) dropped to near its six-month low below 103.10 and is likely to extend its losses as investors' risk appetite for risk-sensitive currencies improved. While a caution adopted by investors for the United States equities supported the 10-year US Treasury yields to 3.88%.

Meanwhile, investors are keeping an eye on Caixin Manufacturing PMI data for further guidance in the New Zealand Dollar. As per the consensus, the economic data is expected to drop marginally to 49.3 from the prior release of 49.4.

On the United States front, investors will focus on the ISM Manufacturing PMI data (Dec), which is likely to escalate to 49.6 vs. the former release of 49.0. Apart from that, investors will keep New Orders Index on the radar, which might climb to 48.1 against the prior release of 47.2.