NZD/USD strengthens above 0.5900 after upbeat China's Caixin Manufacturing PMI data

• NZD/USD gathers strength to near 0.5905 in Monday’s Asian session. 

• China's Caixin Manufacturing PMI unexpectedly rose to 50.5 in August, stronger than expected. 

• Fed’s Daly said policymakers will be ready to lower interest rates soon.

The NZD/USD pair attracts some buyers to around 0.5905 during the Asian trading hours on Monday. The New Zealand Dollar (NZD) strengthens against the US Dollar (USD) after China’s August Caixin Manufacturing Purchasing Managers Index (PMI) report. The US market is closed on Monday due to the Labor Day holiday. 

Data released by Caixin Insight Group on Monday showed that China’s Manufacturing PMI rose to 50.5 in August from 49.5 in July. This figure came in better than the estimation of 49.5. This upbeat PMI report provides some support to the China-proxy Kiwi, as China is a major trading partner of New Zealand. 

The fears of trade tensions between the United States and China might cap the upside for the NZD. Last week, US President Donald Trump warned of steeper tariffs on China if exports of rare-earth magnets were curbed, threatening a precarious trade truce between the world’s two largest economies.

Traders will closely monitor the developments surrounding US tariffs. On Friday, the US Court of Appeals for the Federal Circuit upheld a ruling that the sweeping tariffs the US President Donald Trump unilaterally imposed on most other countries were illegal. The decision impacts Trump's so-called "reciprocal" tariffs on most nations across the globe, including additional levies placed on China, Mexico, and Canada.

Markets expect the Fed to resume lowering its benchmark interest rate in the September meeting. Fed Governor Christopher Waller on Thursday reiterated his support for a cut, saying he would entertain a larger move if labor market data continue weakening. Meanwhile, Francisco Fed President Mary Daly said that policymakers will be ready to cut the interest rates soon, adding that inflation stemming from tariffs will likely prove temporary.

The US Personal Consumption Expenditures (PCE) report released on Friday showed that US inflation held steady in July but remained above the US central bank's 2% target. The data, which was in line with expectations, has increased market odds for an interest rate cut by the Fed this month, which could weigh on the USD.