Both the Australian Dollar (AUD) and New Zealand Dollar (NZD) strengthened against the US Dollar (USD) on Friday, driven by softer-than-expected US labor market data and resilient Chinese services sector activity. The AUD/USD pair climbed near the 0.6940 level, while NZD/USD traded around 0.5710, up 0.21% on the day [1][2]. The US Dollar came under pressure after Thursday's US employment report showed the economy added just 57,000 Nonfarm Payrolls in June, significantly below market expectations of 110,000, signaling a cooling labor market [2]. This reinforced expectations that the Federal Reserve may have less room to keep policy restrictive, weighing on Treasury yields and reducing demand for the Greenback [1][2].
In Australia, the S&P Global Composite PMI rose to 50.4 in June from 49.8, moving back above the 50 expansion threshold. The Services PMI also improved to 50.5 from 49.9, indicating a return to modest growth in the service sector [1]. Similarly, the New Zealand Dollar drew support from China's RatingDog Services PMI, which eased slightly to 54.1 in June from 54.4 in May but remained firmly in expansion territory. Given both Australia and New Zealand's close trade ties with China, resilient Chinese services activity helped bolster sentiment for both currencies [1][2].
On the monetary policy front, ASB Bank in New Zealand dropped its call for a July interest rate hike by the Reserve Bank of New Zealand (RBNZ), now expecting the central bank to keep its Official Cash Rate unchanged this month before resuming gradual tightening from September, with 25-basis-point increases projected to take the policy rate to 3.25% by early 2027 [2]. Meanwhile, the CME FedWatch tool showed the probability of a September US rate hike fell to around 53%, down from nearly 63% before the employment report, further weighing on the US Dollar and supporting risk-sensitive currencies like the AUD and NZD [2].
Technical analysis for AUD/USD indicated the pair was attempting to stabilize after a modest rebound, trading at 0.6938. Resistance was noted at 0.6945 and 0.6967, with support at 0.6931, 0.6922, and 0.6912 [1]. For NZD, the currency was the strongest against the Canadian Dollar on the day, with a 0.32% gain, and also posted gains against other major currencies including the AUD and USD [2].
CONCLUSION
The Australian and New Zealand Dollars both benefited from weaker US labor data and robust Chinese services activity, leading to gains against the US Dollar. Market sentiment turned more positive for the AUD and NZD as expectations for further US rate hikes diminished and Chinese demand remained resilient. The outlook for both currencies remains supported by external data and shifting monetary policy expectations.