NZD/USD bounces back to near 0.5950 as US Dollar dives on Fed’s bulk rate-cut bets

• NZD/USD rebounds swiftly after posting a fresh nine-month low near 0.5850 after a sharp weakness in the US Dollar.
• Fed Goolsbee sees emergency rate cuts on the table.
• The NZ Dollar will dance to the tunes of the Q2 Employment data.

The NZD/USD pair recovers at a faster pace after plunging to near 0.5850 in Monday’s New York session. The Kiwi asset bounces back strongly after posting a fresh nine-month low as the US Dollar (USD) weakens on expectations that the Federal Reserve (Fed) could announce an emergency rate-cut decision due to growing fears of a United States (US) economic slowdown.

The speculation for Fed’s emergency rate cuts has swelled after Chicago Fed Bank President Austan Goolsbee’s interview with CNBC. Goolsbee said, emergency rate cuts are on table.

Deepening fears of US slowdown have prompted risk-aversion among market participants. The S&P 500 has opened with a bloodshed, showing signs of a sharp decline in investors’ risk-appetite.

Fears of US slowdown indicated by a sharp rise in the Unemployment Rate to 4.3%, slower job growth and contracting manufacturing sector have weighed heavily on the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, dives almost 1% to near 102.00. 10-year US Treasury yields have plummeted below 3.7%.

Meanwhile, the US ISM Services PMI has returned into the expanding trajectory after contracting in June. The PMI report showed that activities in the service sector expanded at a faster-than-expected pace to 51.4. Investors anticipated a growth in the Services PMI to 51.0 from the former release of 48.8.

In the Asia-pacific region, the next move in the New Zealand Dollar (NZD) will be influenced by the Q2 Employment data, which will be published on Wednesday. The Unemployment Rate is estimated to have increased to 4.7% from the prior release of 4.3%. Annual Labor Cost Index is expected to have decelerated to 3.5% from Q1 release of 3.8%, with quarterly figure growing steadily by 0.8%. Easing labor market conditions would fuel expectations of early rate cuts by the Reserve Bank of New Zealand (RBNZ).