NZD/USD was trading near 0.5710 on Friday, up 0.21%, as the US Dollar weakened after a softer US jobs report and improved risk sentiment supported the Kiwi. With US markets closed for Independence Day, liquidity was expected to be thinner, potentially limiting follow-through. Support also came from Chinese data: the RatingDog Services PMI slipped to 54.1 in June from 54.4 in May, yet it still pointed to steady expansion in services, a backdrop that tends to matter for New Zealand given its trade exposure to China.
On rates, ASB Bank no longer expects a July hike from the Reserve Bank of New Zealand, forecasting the Official Cash Rate will be left unchanged this month before a gradual tightening resumes from September; it projects 25-basis-point steps taking the policy rate to 3.25% by early 2027. In the US, June Nonfarm Payrolls rose by 57K versus expectations of 110K, and the CME FedWatch measure showed the implied chance of a September move easing to about 53% from nearly 63%, weighing on the Greenback.
US Labor Market Slowdown And NZD/USD Outlook
Given the sharp slowdown in the US labor market, we see a clear opportunity for NZD/USD to trend higher in the coming weeks. The reported addition of only 57,000 jobs is not a one-off event but confirms a cooling trend seen over the last year, with US job openings recently falling below 8 million for the first time since 2021. This fundamental weakness in the US economy puts significant downward pressure on the US Dollar.
This creates a stark monetary policy divergence that we can trade on. While the Federal Reserve is now less likely to raise rates, New Zealand’s inflation remains stubbornly high, last recorded at an annual rate of 3.6%, keeping the Reserve Bank of New Zealand on a tightening path. We expect this policy gap between the two central banks to widen, directly benefiting the Kiwi dollar.
Trading Strategy And Impact Of Chinese Data
For traders, this suggests positioning for further NZD/USD strength through derivatives. We believe buying call options on the NZD/USD pair is a prudent strategy to capitalize on expected upside momentum while managing risk. The increase in market volatility following the jobs report makes these options more sensitive to price moves, which is exactly what this trade targets.
The positive economic signals from China, New Zealand’s largest trading partner, provide another layer of support for this view. China’s services sector has now expanded for 18 consecutive months, signaling a stabilization that buoys demand for New Zealand’s exports. This helps insulate the NZD from global slowdown fears and reinforces its strength relative to the weakening US Dollar.
