NZD/USD falls toward 0.5950 following Business NZ PMI, awaits UoM Consumer Sentiment Index

• NZD/USD loses ground as the Business NZ PMI falls to 49.9 in August.
• The US Dollar may lose ground due to the rising likelihood of three Fed rate cut bets by the end of 2025.
• Weaker US labor market conditions strengthen the case for multiple Fed rate cuts in 2025.

NZD/USD depreciates after registering around 1% gains in the previous two sessions, trading around 0.5960 during the early European hours on Friday. The pair loses ground as the New Zealand Dollar (NZD) struggles after the release of the Business NZ Performance of Manufacturing Index (PMI), which fell to 49.9 in August, slowing down from July's 52.8. The report underscores that manufacturing has not yet achieved sustained growth after a prolonged downturn during 2023 and 2024.

The New Zealand Dollar may further face challenges on a dovish policy outlook from the Reserve Bank of New Zealand (RBNZ). RBNZ Governor Christian Hawkesby reaffirmed on Thursday that the central bank's outlook for another 50 basis points cut to the Official Cash Rate (OCR) by year-end, noting that the pace of easing will depend on incoming data.

The US Dollar (USD) may also struggle as market expectations for three Federal Reserve (Fed) rate cuts this year increase after US Weekly Initial Jobless Claims climbed to their highest since October 2021. The release of the University of Michigan (UoM) Consumer Sentiment Index will be the highlight later on Friday.

The increased jobless claims, along with last week's weak Nonfarm Payrolls report, overshadow a hotter-than-expected consumer inflation reading. It's worth noting that when interest rates are low, investors often turn to non-yielding assets in pursuit of higher returns.