NZD/USD rallies beyond 0.5900 on Dollar weakness, strong China's trade

• The New Zealand Dollar approaches three-week highs, buoyed by the US Dollar's weakness.
• The US Dollar remains pinned near lows as investors brace for a Fed rate cut next week.
• China's trade surplus beat expectations earlier on Monday, increasing bullish pressure on the NZD.

The New Zealand Dollar has opened the week on a strong note, fuelled by US Dollar weakness, as investors brace for a Federal Reserve rate cut next week, and strong trade balance figures from China, New Zealand's main trading partner.

The pair is trading higher for the second consecutive day, reaching intra-day highs at 0.5910, a few pips ahead of the three-week highs at 0.5917. Friday's impulsive rebound from levels below 0.5840 suggests that the pair might be on track for a deeper recovery.

Fed easing hopes keep the USD on its back foot

On Friday, a weaker-than-expected US Nonfarm Payrolls report confirmed that the US labour market has lost momentum and cemented hopes for a Fed cut next week. Speculation about the possibility of a 50 basis point cut returned to the market, weighing heavily on the US Dollar.

Net employment creation declined in the US to 22K in August, from 79K in July, but June's reading was revised to a 13K job loss for the first time since 2020, in the height of the pandemic. Apart from that, the US Unemployment Rate increased to 4.3%, from 4.2% adding pressure on the central bank to ease its monetary policy.

The New Zealand Dollar, on the other hand, has been boosted by a larger-than-expected Trade Surplus in China, which rose to USD 102.33 billion against market expectations of a USD 99.2 billion surplus.