NZD/USD extends upside to near 0.5950 amid hopes for Fed jumbo rate cut

• NZD/USD drifts higher to around 0.5950 in Tuesday's early Asian session. 
• The chance of a jumbo rate cut rises after a dismal US August jobs report. 
• RBNZ's dovish expectations might cap the upside for the pair. 

The NZD/USD pair extends the rally to near 0.5950 during the early Asian session on Tuesday. The New Zealand Dollar (NZD) strengthens against the US Dollar (USD) due to rising expectations of a jumbo rate cut by the US Federal Reserve (Fed). Traders will keep an eye on the US August Producer Price Index (PPI) report, which is due later on Wednesday. 

The recent US Nonfarm Payroll (NFP) showed that the US economy added 22,000 jobs in August. This was significantly lower than the 75,000 jobs expected and followed a revised increase of 79,000 in July. The Unemployment Rate edged up to 4.3% in August from 4.2% in July, as projected. 

Traders ramp up their bets on an extra rate reduction by the Fed as the labor market continues to weaken. Fed funds futures are currently pricing in nearly a 90% possibility of a 25 basis points (bps) cut this month and a 10% odds of a 50 bps rate cut, according to LSEG estimates.

The upcoming US inflation report later this week will be closely watched. The headline PPI is expected to show an increase of 3.3% YoY in August, while the core PPI is projected to show a rise of 3.5% during the same period. This figure will be crucial in shaping the Fed's future policy decisions. If the report shows hotter-than-expected inflation, this could boost the Greenback and create a headwind for the pair. 

A dovish tone from the Reserve Bank of New Zealand (RBNZ) might weigh on the Kiwi. The RBNZ cut the Official Cash Rate (OCR) to 3.0% at its August meeting, driven by a stalled economic recovery. The New Zealand central bank stated that there is scope to lower the OCR further if medium-term inflation pressures continue to ease as expected.