• The New Zealand Dollar remains under pressure, with NZD/USD down 1.00% on the day.
• China’s RatingDog Manufacturing PMI slows in May but beats market expectations.
• Geopolitical tensions support the US Dollar ahead of Friday’s US jobs report.

NZD/USD trades around 0.5930 at the time of writing on Monday, down 1.00% on the day, as the US Dollar (USD) benefits from renewed safe-haven demand amid a risk-off market environment. The pair remains under pressure despite the release of better-than-expected Chinese manufacturing data, which would normally support the New Zealand Dollar (NZD) due to New Zealand’s strong economic ties with China.

Data released on Monday showed that China’s RatingDog Manufacturing Purchasing Managers Index (PMI) eased to 51.8 in May from 52.2 in April. However, the reading came in above market expectations of 51.4. Despite the stronger-than-expected result, the Kiwi failed to gain traction as investors continued to favor defensive assets.

Market sentiment remains dominated by developments in the Middle East. According to the Iranian Tasnim News Agency, Tehran has suspended message exchanges with Washington due to Israel’s ongoing military operations in Lebanon against Hezbollah. In addition, Iran accused the United States (US) of violating the ceasefire after the US Central Command (CENTCOM) carried out strikes on Iranian radar and drone facilities over the weekend.

These developments have supported both the US Dollar and Oil prices. The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, rebounds toward 99.30 at the time of press, after touching a two-week low on Friday. At the same time, West Texas Intermediate (WTI) Crude Oil rises by 6.40%, raising concerns about renewed inflationary pressures.

Markets are also assessing the possibility that the Federal Reserve (Fed) could maintain a more hawkish stance if higher energy prices fuel inflation. According to the CME FedWatch tool, investors currently see a 42% chance of a 25-basis-point rate hike at the December meeting.

Market attention will turn to US labor market data later this week, including the ADP Employment Change report and Friday’s Nonfarm Payrolls (NFP) release. A stronger-than-expected employment report could provide additional support for the US Dollar and increase downside pressure on NZD/USD.