New Zealand Dollar struggles to rebound despite softer US data

The New Zealand Dollar (NZD) has been struggling to recover against the US Dollar (USD) on Tuesday, as the NZD/USD exchange rate fell 0.24% to 0.5900. This decline in the NZD comes despite the release of relatively softer economic data from the United States (US). The Institute for Supply Management's (ISM) Manufacturing Purchasing Managers Index (PMI) for August came in at 54.6, which is below the market's expectation of 55.2, indicating a slowdown in US manufacturing activity.

The Employment Index, which measures new orders and employment, also weakened for August, falling to 51.2 from 52.8 in July. Meanwhile, the Labor Market data, as reported by the Bureau of Labor Statistics (BLS), showed a rise in job openings to 7.271 million in July, slightly below the market's expectation of 7.3 million. Despite these weak US economic indicators, the US Dollar (USD) has managed to gain some strength, with the US Dollar Index (DXY) holding steady around 99.65.

The strength of the USD thus continues to pressure the NZD/USD exchange rate, leaving investors to look to the Reserve Bank of New Zealand (RBNZ) for near-term guidance. Analysts at ING predict that the RBNZ will increase interest rates by 25 basis points to 2.75% at their upcoming meeting, but point out that the reaction in the NZD will depend on whether the statement includes a hawkish outlook and the updated rate and economic projections.