NZD/USD remains on the defensive above the 0.5700 mark amid USD demand, China’s economic woes

• NZD/USD remains under selling pressure near a monthly low of around 0.5907.
• The Federal Reserve (Fed) Chairman Jerome Powell stated that they are preparing to raise interest rates further, if necessary.
• The UoM Consumer Confidence Index (Aug) fell to 69.5 from 71.6 in July.
• Market players await the US Nonfarm Payrolls, inflation data ahead of the September FOMC meeting.

The NZD/USD pair recovers some lost ground above the 0.5900 mark but remains under pressure near the monthly low during the early Asian session on Monday. The US economy’s strength continues to support the US Dollar. NZD/USD currently trades around 0.5907, gaining 0.08% on the day.

The Federal Reserve (Fed) Chairman Jerome Powell said at the Jackson Hole Economic Symposium that the central bank is prepared to raise interest rates further, if necessary, and will determine the next rate move based on data. Powell indicated that the strong economic growth and tight labor market conditions might pave the way for further tightening cycle. If the data do not show indications of softening, additional rate rises would be appropriate.

Philadelphia Fed President Patrick Harker stated that he does not see the need for additional rate hikes at this time and the Fed should hold rates steady and observe the impact of policy on the economy. Meanwhile, Cleveland Fed President Loretta Mester said that GDP and labor market data show that the economy is gaining momentum. She emphasized that the current rates are not restrictive enough to reach the inflation target and a lower growth rate would be essential to moderate inflation.

About the data on Friday, the University of Michigan’s (UoM) Consumer Confidence Index for August fell to 69.5 from 71.6 in July and was revised from the first reading of 71.2. Additionally, The Current Conditions Index dropped from 76.6 to 75.7 (revised from 77.4), while the Expectations Index fell from 68.3 to 65.5 (revised from 67.3).

On the other hand, the headlines surrounding Chinese economic woes weigh on the China-proxy Kiwi. That said, the Chinese government has promised aid for the property market, but its efforts have so far failed to restore investor confidence. The chief economist of the Reserve Bank of New Zealand (RBNZ) said last week that policymakers would lower the OCR sooner than we have signaled if China experienced a more significant deceleration than the RBNZ anticipates.

Looking ahead, market participants will shift their focus to the economic data. The US Nonfarm Payrolls and inflation data will be the highlight ahead of the September FOMC meeting. Also, the Chinese Purchasing Managers’ Indexes (PMI) will be in focus. The data will be critical for determining a clear movement for the NZD/USD pair.