NZD/USD REMAINS ON THE DEFENSIVE NEAR 0.6200 AHEAD OF RBNZ KEY EVENT

NZD/USD remains on the defensive near 0.6200 on the first day of the week.

Investors digested the US labor data and believe the Federal Reserve (Fed) may only hike once this year.

Investors’ focus shifts to the Reserve Bank of New Zealand meeting on Wednesday. 

The NZD/USD pair loses momentum after approaching the high of 0.6220, posting small losses near 0.6200 in the early Asian session. The pair struggles as the Greenback attempts a tepid bounce early Monday. 

On Friday, the US Labor Department reported that Nonfarm Payrolls (NFP) rose by 209,000 in June. The economy added jobs at a slower-than-anticipated pace last month and decreased from 306,000 in May. Additionally, the Unemployment Rate dropped from 3.7% to 3.6% in June and Average Hourly Earnings remained unchanged at 0.4%, above the market expectation of 0.3%.

Following the weaker US data, the NZD/USD pair jumped to 0.6220 on Friday before retreating toward 0.6200 so far this Monday, as investors digested the US labor data, believing the Federal Reserve (Fed) may not hike twice this year, as previously estimated. 

However, market players remain certain the US Federal Reserve (Fed) will increase rates by 25 basis points (bps) at the July 25-26 policy meeting, according to the CME Group’s FedWatch Tool. At the moment, the odds are at 92.4% for a 25bps July Fed hike, higher than last week’s 86.8%.

Meanwhile, the New Zealand Institute of Economic Research’s (NZIER)'s latest recommendation on Monday suggests that the Reserve Bank of New Zealand (RBNZ) should keep its Official Cash Rate (OCR) at 5.50% at the monetary policy decision meeting due this Wednesday.

Additionally, a Reuters poll indicated the RBNZ will likely keep interest rates unchanged at 5.50% on Wednesday, marking the end of a 20-month hike cycle. 

Looking ahead, market participants would look forward to more cues about the Reserve Bank of New Zealand (RBNZ) monetary policy decision. On the US Dollar front, the US Consumer Price Index (CPI), the Producer Price Index (PPI) and the US University of Michigan Preliminary Consumer Sentiment (July) will be featured later in the week. These data will help determine NZD/USD direction in the near term.

The immediate focus, however, remains on the Chinese inflation data due in the next hour for fresh directional impetus.