NZD/USD trades with mild gains above 0.6150, US Services PMI looms

• NZD/USD trades stronger near 0.6175 in Wednesday’s early Asian session. 
• The rising expectation that the Fed will start cutting rates from the September meeting weighs on the USD. 
• The encouraging Chinese Caixin Manufacturing PMI supports the China-proxy NZD. 

The NZD/USD pair posts modest gains around 0.6175 during the early Asian session on Wednesday. The USD Index (DXY) weakens to multi-week lows near 104.00 on the back of rising speculation of an interest rate cut by the Federal Reserve (Fed) this year, which provides some support to the pair. Investors await the key US data releases later on Wednesday, including the US ADP Employment Change, the final S&P Global Services PMI, and the ISM Services PMI.

The weakening of the Greenback in the previous sessions is driven by a series of weaker US economic data, despite the hawkish tone from US Fed officials in recent weeks. Traders raise their bets on the expectation that the Fed will start lowering borrowing costs from the September meeting. According to the CME FedWatch Tool, the markets have priced in nearly a 54.9% chance of a rate cut in September, up from 49% at the end of last week. 

On Tuesday, the US JOLTs Job Openings decreased from 8.355 million to 8.059 million in April, missing the market expectation of 8.34 million. The USD will be determined by Wednesday’s US ISM services data, which is estimated to improve to 50.5 in May from 49.4 in the previous reading. The weaker reading could further weigh on USD and Treasury yields. 

On the Kiwi front, China’s manufacturing sector accelerates for the fourth consecutive month due to strong increases in consumer goods production. The Chinese Caixin Manufacturing PMI came in at 51.7 in May from 51.4 in the previous reading, above the market consensus of 51.5. This, in turn, boosts the China-proxy New Zealand Dollar (NZD) as New Zealand is one of China's leading trading partners.