- NZD/USD holds losses as the Business NZ PSI fell to 47.5 in August from 48.9 in July.
- China’s Retail Sales are expected to climb by 3.8% YoY, while Industrial Production may increase by 5.8% YoY in August.
- Morgan Stanley and Deutsche Bank now forecast that the US Fed will implement three rate cuts this year.
NZD/USD extends its losses for the second successive session, trading around 0.5950 during the Asian hours on Monday. The currency cross holds losses as the New Zealand Dollar (NZD) struggles following the Business NZ Performance of Services Index (PSI), which fell to 47.5 in August from 48.9 in July, remaining well below the long-term average of 52.9 and marking its 18th consecutive month of contraction.
Traders adopt caution ahead of Retail Sales and Industrial Production from New Zealand’s top trading partner, China, due later in the day. Retail Sales is expected to show an increase of 3.8% year-over-year (YoY) in August, compared to 3.7% in the previous reading. Industrial Production is projected to show a rise of 5.8% YoY in the same period versus 5.7% prior.
US Treasury Secretary Scott Bessent, Trade Representative Jamieson Greer, and their Chinese counterpart, Vice Premier He Lifeng, discussed trade and the economy during high-level talks in Madrid. Traders will be watching closely as the US-China talks move into their second day.
However, the downside of the NZD/USD pair could be restrained as the US Dollar (USD) may face challenges as a weakening US labor market boosts the likelihood of the US Federal Reserve (Fed) delivering its first rate cut of the year on Thursday. The Fed is expected to lower rates by 25 basis points at its September meeting, though there remains a slight chance of a 50-basis-point cut. Markets have also factored in continued easing through 2026 to help stave off a potential recession.
Morgan Stanley and Deutsche Bank now expect the US central bank to deliver three rate cuts this year, after recent data pointed to easing inflation pressures. In separate notes on Friday, the brokerages projected 25-basis-point reductions at each of the Fed’s remaining meetings in September, October, and December, according to Reuters.
