NZD/USD firmed to about 0.5705 in Asian trading on Friday, with the New Zealand dollar supported by Chinese data, while US markets were shut for Independence Day. RatingDog reported China’s Services PMI edged down to 54.1 in June from 54.4 in May, yet it still implied the third-steepest rise in services activity in nearly three years. Services exports rose for a second straight month and grew at the fastest pace since October 2024, providing a tailwind for the China-linked Kiwi.
In New Zealand, ASB Bank removed its call for a July rise from the Reserve Bank of New Zealand and expects the Official Cash Rate to be held at the July meeting, then lifted in 25-basis-point steps from September, peaking at 3.25% by early 2027. In the US, softer labour signals weighed on the dollar as Nonfarm Payrolls increased by 57,000 in June versus a 110,000 forecast, while the unemployment rate fell to 4.2% from 4.3%. CME FedWatch showed markets pricing nearly 52% odds of a rate rise by September, down from 66% before the jobs report.
US Labour Data And Chinese Services Resilience Support Kiwi
Based on the current date of July 3, 2026, the recent soft US Nonfarm Payrolls report is a significant event, shifting the outlook for the US Dollar. The reported addition of only 57,000 jobs, far below the 110,000 forecast, strongly suggests the US labor market is cooling faster than anticipated. We see this as a primary driver that will likely weigh on the dollar in the coming weeks.
We find the resilience in China’s economy, demonstrated by the strong Services PMI of 54.1, to be a key supportive factor for the New Zealand dollar. As New Zealand’s largest trading partner, a robust Chinese service sector directly supports the demand for Kiwi exports. This contrasts sharply with the slowing momentum we are observing in the United States.
While the Reserve Bank of New Zealand has pushed back expectations for a rate hike from July to September, the overall policy path remains hawkish compared to the Federal Reserve. This rate differential is a fundamental tailwind for the NZD/USD pair. We note that New Zealand’s Q2 2026 inflation data, released just two weeks ago, came in at 3.1%, still stubbornly above the RBNZ’s target range and justifying future rate increases.
Derivative Trading Strategies And Key Risks
For derivative traders, we believe this environment is favorable for positioning for a continued rise in NZD/USD. We are looking at buying call options with an August expiry and a strike price around 0.5750 to capture potential upside. This strategy offers a defined-risk way to profit if the pair continues its upward trajectory driven by US economic weakness.
Given the drop in Fed rate hike odds for September to nearly 52%, implied volatility in the currency pair may present opportunities. We are also considering selling out-of-the-money puts below the 0.5650 level to collect premium. This approach benefits from our view that a significant downturn is unlikely and profits from time decay during a gradual grind higher.
The primary risk to this outlook is a surprise rebound in next week’s US economic data, particularly the Consumer Price Index (CPI). A historically similar pattern was observed in early 2023, where a weak jobs report was quickly overshadowed by persistent inflation, causing a rapid reversal in market sentiment. Therefore, any positions should be sized appropriately to account for this potential volatility.
