NZD/USD gains traction to three-month highs above 0.6200 on Fed rate cut bets

• NZD/USD attracts some buyers near 0.6205 on Thursday. 
• The US ISM Services PMI came in stronger than expected, rising to 53.8 in May from 49.4 in April. 
• The encouraging Chinese Caixin Services PMI data on Wednesday supports the China-proxy NZD. 

The NZD/USD pair extends the rally to three-month highs around 0.6205 on Thursday during the early Asian trading hours. Investors start to price in two interest rate cuts by the Federal Reserve (Fed) this year, which drags the Greenback lower against the Kiwi. The US weekly Initial Jobless Claims is due on Thursday ahead of the highly-anticipated US Nonfarm Payrolls (NFP) data on Friday. 

The US Dollar (USD) recovery proved short-lived despite the stronger-than-expected US ISM Services Purchasing Managers Index (PMI) data for May. The Services PMI improved to 53.8 from 49.4 in April, better than the forecast of 50.8. 

The recent weaker US GDP and more signs of a weakening labour market prompted rising Federal Reserve (Fed) rate-cut bets, which might weigh on the USD in the near term. A majority of forecasters in a Reuters poll showed that the Fed is likely to cut its key interest rate in September and once more this year. Traders are currently pricing in about a 70% possibility of a Fed rate cut in September, according to CME FedWatch.

On the Kiwi front, the encouraging Chinese data provides some support to the New Zealand Dollar (NZD), as China is New Zealand's largest trading partner. On Wednesday, the latest data released by Caixin showed that China's Services PMI rose to 54.0 in May from 52.5 in April, beating market expectations of 52.6 by a wide margin in the reported period.