NZD/USD loses its recovery momentum around 0.5950, all eyes on the US NFP

• NZD/USD recovery loses steam and declines to 0.5950 on Friday.
• The Reserve Bank of New Zealand agreed that rates may need to remain at a restrictive level for a longer time.
• The US Initial Jobless Claims last week improved to 207K vs. 205K prior.
• US Nonfarm Payrolls will be a closely watched event on Friday.

The NZD/USD pair reverses its direction after hitting an intraday high of 0.5971 during the early European session on Friday. Markets turn cautious ahead of the key US employment data on Friday. The pair currently trades near 0.5950, losing 0.25% for the day.

Following the Reserve Bank of New Zealand (RBNZ) monetary policy meeting on Wednesday, RBNZ decided to maintain the Official Cash Rate (OCR) unchanged at 5.5%, as widely expected. The committee agreed that interest rates may need to remain at a restrictive level for a more sustained period, according to the RBNZ statement.

On Thursday, New Zealand’s ANZ Commodity Price for September came in at 1.3% versus a 2.9% drop prior. Earlier this week, the nation’s NZIER Business Confidence for the third quarter (Q3) fell to -52% QoQ versus -63% in the previous reading.

The Federal Reserve (Fed) is not expected to abandon its ‘higher-for-longer’ stance on interest rates. Market players await the highly-anticipated US Nonfarm Payrolls for more clarity about labor market conditions. The US Nonfarm Payrolls are expected to rise by 170K while the Unemployment Rate is estimated to decline to 3.7% from 3.8%. The weaker-than-expected figures could exert some selling pressure on the Greenback against its rivals and act as a tailwind for the NZD/USD pair.

US data on Thursday revealed that the weekly Initial Jobless Claims for the week ending on September 30 improved to 207K from 205K in the previous week, below the market estimation of 210K. Additionally, the US Balance of Trade deficit was $58.3B from the $64.7B recorded in July, lower than the market consensus of $ 62.3 B.

In the absence of economic data released from the New Zealand docket on Friday, the NZD/USD pair remains at the mercy of USD price dynamics. The US Nonfarm Payrolls will be in the spotlight and could trigger the volatility in the market. Also, the US Average Hourly Earnings for September, and the Unemployment rate will be released from the US docket on Friday. These events could give a clear direction to the pair.