The NZD/USD pair extends its recovery for a third consecutive session, trading near the 0.5800 level during Tuesday’s Asian hours.
The New Zealand Dollar gains ground as the US Dollar softens following weaker-than-expected US economic data, while investors remain cautious ahead of Friday’s US employment report, which is expected to provide clearer guidance on the Federal Reserve’s interest rate outlook.
Soft US manufacturing data weighs on USD
The US Dollar came under pressure after the latest data from the Institute for Supply Management showed continued weakness in the manufacturing sector.
The ISM Manufacturing PMI fell to 47.9 in December from 48.2 in November, marking the tenth consecutive month in contraction and undershooting market expectations of 48.3. The disappointing release triggered an immediate pullback in the Greenback, lending support to NZD/USD.
Fed uncertainty adds to dollar headwinds
Further pressure on the US Dollar stems from renewed concerns over the Federal Reserve’s independence. With Fed Chair Jerome Powell’s term set to expire in May, markets are increasingly focused on President Donald Trump’s upcoming decision on his successor.
Trump has indicated that he will announce his pick later this month and has emphasized a preference for a chair who strongly supports lower interest rates, a stance that could reinforce expectations for a more accommodative US monetary policy.
Geopolitical risks may limit upside
Despite the softer Dollar tone, geopolitical developments could cap gains in NZD/USD in the near term. The United States has captured Venezuelan President Nicolás Maduro and his wife, Cilia Flores, in Caracas, with President Trump stating that Washington is now effectively in charge of Venezuela during a transitional period.
Ongoing uncertainty and tensions between the US and Venezuela could revive safe-haven demand, potentially offering some near-term support to the US Dollar and limiting the pair’s upside momentum.
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