The NZD/USD bounces from a minimum of two months after the weak NFP data

• The NZD/USD bounces from a minimum of two months while the markets react to weak labor data.
• The US NFP report disappoints since the US economy added only 73k jobs in July, well below the expected 110k.
• The CME Fedwatch tool shows an 82% probabilities of a rate cut in September, compared to 37% prior to NFP.

The New Zealand dollar (NZD) recovers from a minimum of two months on Friday while the US dollar (USD) is widely weakened after a disappointing report of non -agricultural payroll (NFP) of July. The Kiwi had been under pressure throughout the week, but registered a strong rebound after the softest labor data caused a strong setback in the dollar and increased the expectations of a cut of interest rates in September by the Federal Reserve (Fed).

At the time of writing, the NZD/USD is firmly quoted on the rise during the American session, around 0.5900, an increase of almost 0.17% in the day after bouncing from an intradic minimum of 0.5856. Despite Friday’s recovery, the PAR is still on its way to registering a weekly loss. Meanwhile, the American dollar index (DXY), which tracks the dollar against a basket of six main currencies, has been abruptly withdrawn from the maximum of two months of 100.26 reached earlier in the day, and now about 98.86 is quoted.

The July NFP report delivered a surprising significant fall, showing that the US economy added only 73,000 jobs, well below the expected 110,000. Adding to the Dovish tone, the BLS made substantial revisions to the data from previous months, with the payrolls of May and June reviewed downward in a total of 258,000 jobs. The unemployment rate rose to 4.2% in July, coinciding with expectations and increasing slightly from 4.1% in June. Although the increase is modest, the unemployment rate has remained confined within a narrow range of 4.0% -4.2% since May 2024, underlining a stable labor market but gradually cools.

Salary growth remained stable, with the average earnings per hour by increasing 0.3% month by month and 3.9% year -on -year, offering mixed signs about underlying inflationary pressures. In the manufacturing sector, the purchasing managers index (PMI) of Global S&P manufacturing rose slightly to 49.8 in July, exceeding the expectations of 49.7 and improving from 49.5 previously. However, the ISM manufacturing PMI, which is observed more closely, did not comply with the forecasts, falling to 48.0 in July since 49.0 in June, pointing to a continuous contraction in the manufacturing activity.

The feeling of the consumer in the US was also weakened in July, adding to the cautious economic tone. The Michigan consumer’s feeling index fell to 61.7, slightly below the expected 62.0 and going down from the previous 61.8. Meanwhile, the consumer expectations index decreased to 57.7, failing to reach the forecast of 58.6.

According to the CME Fedwatch tool, the markets are now valuing a 82% probability of a rate cut at the September meeting of the Federal Reserve, a strong increase from only 37% before the publication of the NFP. However, Fed officials have maintained a cautious tone despite the change in market expectations promoted by the data. Hammack of the Fed said that monetary policy remains “a bit restrictive” but “not far from neutral”, emphasizing that “many more data” will be considered before the September FOMC meeting. Meanwhile, Bostic of the Fed reiterated its base case for a rate cut this year, but pointed out flexibility, saying that it is “open to change your opinion if the data supports it.”