NZD/USD set for weekly gain on RBNZ rate prospects as focus sets on US NFP

Key points

NZD/USD was set to snap a two-day streak of losses on Friday and eyed a 0.54% weekly gain as investors bet interest rates in New Zealand would remain at high levels for longer.

The Reserve Bank of New Zealand, which has delivered a total of 525 basis points of rate hikes since late 2021, is due to hold a policy meeting next week.

Meanwhile, the US Dollar remained firm and US bond yields – elevated, as bets increased that the Federal Reserve has further distance to go in hiking interest rates to rein in inflation.

The most recent macro data showed US private payrolls had risen in June and the number of Americans who filed new claims for unemployment assistance had grown at a moderate pace last week, indicating a resilient labor market.

“The strong (U.S.) data boosted market expectations for a second FOMC rate hike, which previously wasn’t considered as possible,” Carol Kong, currency strategist at Commonwealth Bank of Australia, was quoted as saying by Reuters.

“Those data points suggest tonight’s payrolls and perhaps the average earnings data (could) beat the consensus estimate again, and if we do get another strong result, that could firm the dollar further.”

Market focus now sets on the Non-Farm Payrolls figures due out later on Friday. Employers in all sectors of the US economy, excluding farming, probably added 225,000 job positions in June, according to market consensus.

Having risen to a 16-year high of 5.12% yesterday, the yield on US 2-year Treasury Notes was last at 4.984%.

The yield on US 10-year Treasuries was last at 4.026%, after hitting a four-month high of 4.0830% on Thursday.

As of 7:11 GMT on Friday NZD/USD was edging up 0.14% to trade at 0.6164. Yesterday the major Forex pair went up as high as 0.6219. The latter has been the pair’s strongest level since June 22nd (0.6223).