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NZD/USD struggles around 0.5800 as Chinese PMI figures disappoint
The NZD/USD is exhibiting erratic behavior following the release of China's PMI data. China's Manufacturing PMI fell to 49.2 from 50.0, while Non-Manufacturing PMI fell to 48.7 from 51.9 as anticipated. Weak estimates for the labor cost index by Kiwi could dampen household sentiment.
During the Tokyo session, the NZD/USD pair encountered selling pressure while seeking to surpass the crucial 0.5810 barrier. The asset has encountered formidable obstacles after surpassing the immediate resistance of 0.5810. Combined with a rise in risk-off sentiment and rising nervousness ahead of the Federal Reserve's (Fed) monetary policy, negative Chinese PMI data weigh on the kiwi bulls.
According to the National Bureau of Statistics, China's official Manufacturing PMI has fallen to 49.2 compared to forecasts of 50.0 and the previous reading of 50.1. In addition, the Non-Manufacturing PMI was much lower at 48.7 compared to the expected 51.9 and the previous release of 50.6. The persistence of the zero-tolerance Covid-19 policy appears to have exerted pressure on economic activities.
The concept of risk aversion is gaining traction as yields have rebounded following a turbulent ride. The yields on 10-year US Treasuries have increased to 4.05%, while S&P500 futures have continued to decline.
In addition, the Federal Reserve is anticipated to raise interest rates by 75 basis points (bps) for the fourth time.
This week, the spotlight will also stay on the employment data for New Zealand. The Employment Change for the third quarter is anticipated to be 0.5%, up from the previous reading of 0%. While the Unemployment Rate could fall to 3.2% from the previously reported 3.3%, it is possible that the rate will remain unchanged. The factor that could impact the sentiment of households is a reduction in the labor cost index, which is anticipated to fall to 1% from 1.3% in the previous publication.
Price pressures are soaring in the New Zealand economy, and households need more incomes to pay for goods and services adjusted for inflation. Lower growth in earnings would not be sufficient to offset increasing expenses, which could result in a decrease in demand in the New Zealand region.
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