NZD/USD tests 0.6000, USD falls after weak US ADP jobs data.

• NZD/USD is trading at 0.6000 as the USD faces intense selling pressure due to weak demand for labor.
• Easing labor market conditions could allow the Fed to make a firm decision on interest rates at its September meeting.
• The New Zealand dollar, as a proxy for the Chinese economy, would come under selling pressure if the Caixin manufacturing PMI remains weak.

The pair NZD/USD rallied and tested the psychological resistance of 0.6000 in the early stages of the New York session. The pair discovers significant buying interest as the resistance of the US labor market decreases due to the increase in interest rates by the Federal Reserve (Fed).

Following the decline in job offers in July, the weak private employment report for August confirmed that the demand for labor has softened, as companies preferred to continue operating with the current workforce due to the deteriorating business environment. demand.

US company Automatic Data Processing (ADP) reported August new payrolls at 177,000, significantly below expectations of 195,000 and July’s reading of 324,000. Investors should note that the four-month streak of rising US private employment has come to an end.

Releasing the heat from a tight labor market would also keep inflationary pressures in check. Fed Chairman Jerome Powell conveyed at the Jackson Hole Symposium that inflation is increasingly responding to the labor market. Jerome Powell also noted that further monetary policy actions will remain data dependent and that easing labor market conditions could allow the Fed to make a decision on interest rate stability at the September policy meeting. .

According to CME’s Fedwatch tool, over 90% odds indicate that interest rates will hold steady at 5.25-5.50% in September policy. For the November policy, 57% of the odds support a stable interest rate policy.

As for the New Zealand dollar, investors are awaiting the Caixin Manufacturing PMI for August, due to be released on Friday at 01:45 GMT. The economic data is estimated nominally higher at 49.3 compared to the previous publication of 49.2. Investors should note that a figure below the 50.0 threshold is itself considered a contraction in activity. The New Zealand dollar, as a proxy for the Chinese economy, could come under selling pressure if economic data remains weak.