In Wednesday’s session, the NZD/USD recovered ground, driven by a weak USD following the release of August S&P PMIs. Due to signs of a softening economy, US yields took a big hit, and markets seem to be betting on a less aggressive Federal Reserve (Fed). Investors now focus on Friday’s speech from Jerome Powell at the Jackson Hole Symposium.
The US Manufacturing PMI from August declined to 47, as opposed to the expected 49.3, while the Services index remained within the expansion category at 51 despite being lower than anticipated.
As the Federal Reserve (Fed) stated, decisions will depend on incoming data, weak PMI figures make markets bet that the Fed won't be as aggressive as expected, and the US yields are showing sharp declines. With the 2, 5 and 10-year rates falling by more than 1%, the USD loses interest and trades weak against most of its rivals, and the DXY index fell towards the 103.30 area.
In line with that, according to the CME FedWatch tool, investors still are confident that the Fed won’t hike in September, while the odds of a hike in November fell to 35%
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