NZD/USD approaches 0.6000 amid speculation about a US-Iran peace deal

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The New Zealand Dollar (NZD) appreciates more than 1.5% against the US Dollar (USD) on Wednesday, as rumours that Washington and Iran are close to a peace deal have boosted risk appetite.

NZD/USD rallies about 1.5% on the day and approaches pre-war levels at 0.6000.
An Axios report suggested that the US and Iran would be close to a peace deal.
New Zealand's unemployment rate declined unexpectedly in Q1, providing additional support to the NZD.

The New Zealand Dollar (NZD) appreciates more than 1.5% against the US Dollar (USD) on Wednesday, as rumours that Washington and Iran are close to a peace deal have boosted risk appetite. The pair has broken above the top of the last three weeks’ trading range, to hit session highs a few pips shy of pre-war levels at the 0.6000 area

The US news website Axios, citing two US officials and other sources related to the process, reports that US and Iranian representatives are getting closer to a one-page memorandum of understanding to end the conflict and set the framework for more detailed nuclear negotiations at a later time.

Previously, US President Donald Trump had boosted market sentiment, announcing a pause in the plan to escort vessels through the Strait of Hormuz. These comments follow a press conference by US Secretary of State Marco Rubio, who affirmed on Tuesday that the objectives of the "Operation Epic Fury" in the Iran war had been achieved, suggesting that the US is not willing to resume hostilities.

In New Zealand, data released earlier on Wednesday revealed that the Unemployment Rate eased against expectations to 5.3% in Q1, from 5.4% in the previous quarter, despite lower-than-expected employment growth. Labour costs have also risen, adding pressure on the Reserve Bank of New Zealand (RBNZ) to hike interest rates. The NZD appreciated after the data release.

The focus now is on the US ADP Employment Change Report, due later on the day. ADP data is expected to show that private payrolls increased to 99K in April, from 62K in March, setting a positive precedent for Friday’s all-important Nonfarm Payrolls report.

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.