Ella 
During the Asian session on Friday, NZD/USD extended losses and fell to around 0.5920. NZD/USD is under downward pressure following Thursday’s upbeat U.S. employment data. The number of U.S. initial jobless claims showed that the employment situation was good, which raised concerns about the U.S. inflation situation. In the week ended Aug. 18, U.S. initial jobless claims fell to 230,000 last week from 240,000 previously, in line with expectations.
The dollar (USD) was supported by expectations that the Fed would stick to its hawkish stance ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole symposium. Furthermore, former St. Louis Fed President James Bullard said in an interview with Bloomberg: “A re-acceleration of the economy could put upward pressure on inflation, making it unlikely that the Fed will start cutting rates anytime soon.”
Meanwhile, Philadelphia Fed President Patrick Harker signaled a possible end to the rate hike path. Boston Fed President Susan Collins has argued for keeping interest rates higher for an extended period of time.
Chinese authorities have implemented modest rate cuts and stimulus measures, but these actions do not appear to be enough to revive market sentiment. The deteriorating economic situation in China weighed on the New Zealand dollar due to the close trade relationship between China and New Zealand. Market participants also expect the Reserve Bank of New Zealand (RBNZ) to start cutting the official cash rate (OCR) earlier than initially expected if the economic situation in China deteriorates further.
The U.S. dollar index (DXY), which measures the greenback’s performance against six major currencies, extended gains to trade around 104.20. Market participants will be closely watching speeches from Federal Reserve Chairman Jerome Powell for insights on economic conditions and the outlook for inflation, which will influence monetary policy in September. This event will help investors clarify the outlook for NZD/USD before launching a new round of bets on it.
