NZD/USD maintains position above 0.5650 ahead of US ISM Services PMI

• NZD/USD rises as the US Dollar corrects downwards ahead of ISM Services PMI due later in the day.
• President-elect Donald Trump stated that his tariff policy will not be scaled back.
• The New Zealand Dollar received support from the improved China's Services PMI in December.

NZD/USD extends its winning streak, trading around 0.5670 during the early European hours on Tuesday. Traders will likely observe the US ISM Services Purchasing Managers Index (PMI) scheduled to be released later in the North American session. On Wednesday, markets will focus on the Minutes from the Federal Reserve's (Fed) December policy meeting.

On Monday, the seasonally adjusted S&P Global US Services PMI Business Activity Index climbed for the second consecutive month in December, reaching a 33-month high of 56.8, up from 56.1 in November. Meanwhile, the S&P Global US Composite PMI Output Index rose to 55.4 in December, compared to 54.9 in November. This latest reading indicated a significant monthly increase in business activity, marking the fastest expansion since April 2022.

The overall growth in activity was primarily driven by robust performance in the service sector, even as manufacturing production experienced a further decline. This resilience in services may have helped cushion potential downside pressure on the US Dollar.

Additionally, the upside of the NZD/USD pair could be limited as the US Dollar (USD) may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back. Trump also refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports. Traders are expected to closely watch developments related to Trump's tariff strategy.

The New Zealand Dollar (NZD) gained support from the improved Caixin Services PMI for China, its key trading partner. The index rose to 52.2 in December 2024, up from 51.5 in November, exceeding market expectations of 51.7. This marks the fastest growth in the services sector since May.

However, the growing likelihood of aggressive monetary easing by the Reserve Bank of New Zealand (RBNZ) could limit the upside potential of the Kiwi Dollar. The RBNZ is anticipated to reduce the current cash rate of 4.25% by 50 basis points during its February meeting.