NZD/USD consolidates around 0.5950 as investors await US NFP

• NZD/USD trades sideways around 0.5950, with investors focusing on the US NFP report for July.
• The Fed is expected to roll back its restrictive policy framework from September.
• Risk aversion market mood has dampened the New Zealand Dollar’s near-term outlook.

The NZD/USD pair trades in a tight range near 0.5950 in Friday’s European session. The Kiwi asset exhibits indecisiveness among market participants as investors await the United States (US) Nonfarm Payrolls (NFP) data for July, which will be published at 12:30 GMT.

The NFP report will indicate the current status of the labor market, which will influence market speculation for Federal Reserve’s (Fed) September interest rate cuts. According to the estimates, US employers are expected to have hired 175K fresh workers, lower than 206K payrolls recorded in June. The Unemployment Rate is expected to remain steady at 4.1%.

Apart from Employment numbers, investors will focus on the Average Hourly Earnings data, a key measure to wage growth that fuels consumer spending which eventually influence price pressures. Annually, the wage growth measure is estimated to have decelerated to 3.7% from the prior reading of 3.9%, with monthly figure growing steadily by 0.3%.

Meanwhile, market expectations for the Fed reducing interest rates are firm as Fed Chair Jerome Powell acknowledged that policymakers have gained greater confidence that inflation will return to the desired rate of 2% from Consumer Price Index (CPI) reports released in the second quarter. Jerome Powell said rate cuts will be on the table in September if inflation continues to decline consistently with bank’s expectations.

In the Asia-Pacific region, the overall outlook of the New Zealand Dollar (NZD) remains weak as investors become risk-averse amid fears of slowdown in the US economy. Also, China’s vulnerable economic prospects have dampened investors’ risk appetite.

Going forward, the major trigger for the Kiwi Dollar will be the Q2 Employment and Labor Cost Index data, which will be published on Tuesday. The Employment data will influence market expectations for Reserve Bank of New Zealand (RBNZ) rate cuts this year.