The New Zealand dollar rose to around $0.596 on Monday, recouping losses from the last session and moving back toward a four-week high, supported by a softer US dollar ahead of the widely expected FOMC rate cut later this week.
Markets are pricing in a 96% chance of a 25bps reduction on Wednesday and just a 4% probability of a larger half-point move, following recent US data that pointed to a softer labor market and easing inflation pressures.
At home, the latest PMI survey showed the services sector weakening further in August, remaining well below its long-term average and extending its contraction streak to 18 months.
The downbeat results underscored the sluggish state of the economy and strengthened expectations for additional policy easing by the Reserve Bank, with Governor Christian Hawkesby recently reaffirming guidance for another 50bps cut by year-end, conditional on incoming data.
Investors are now focused on Q2 GDP figures, along with the August trade balance.