NZD/USD sticks to modest gains after weaker Chinese PMI, remains below 50-day SMA

• NZD/USD edges higher for the second straight day, albeit lacks follow-through buying.
• Markets react little to the disappointing release of China’s Caixin Services PMI for June.
• The focus remains on FOMC meeting minutes for cues about the Fed’s rate-cut path.

The NZD/USD pair builds on the previous day's goodish rebound from the 0.6050-0.6045 area, or its lowest level since mid-May and attracts some follow-through buyers for the second successive day on Wednesday. Spot prices stick to modest intraday gains following the release of softer Chinese data, albeit lack bullish conviction and remain below the 50-day Simple Moving Average (SMA) support breakpoint.

According to the latest data released by Caixin, China's Services PMI fell from 54.0 in May to 51.2 in June as compared to the market forecast for a reading of 53.4. This adds to worries about a slowdown in the world's second-largest economy and acts as a headwind for antipodean currencies, including the Kiwi. Apart from this, expectations that the Reserve Bank of New Zealand (RBNZ) will cut rates earlier than projected further contribute to keeping a lid on any meaningful appreciating move for the NZD/USD pair. 

Meanwhile, the US Dollar (USD) struggles to gain any meaningful traction amid growing acceptance that the Federal Reserve (Fed) will begin its rate-cutting cycle later this year. The bets were reaffirmed by relatively dovish remarks by Fed Chair Jerome Powell on Tuesday, saying the US economy has made significant progress on inflation and is back on the disinflationary path. This, along with retreating US Treasury bond yields, fails to lure the USD bulls and should continue to act as a tailwind for the NZD/USD pair. 

Market participants now look forward to the US economic docket, featuring the release of the ADP report on private-sector employment and the ISM Services PMI. The focus, however, will remain glued to the FOMC meeting minutes, which, along with the closely-watched US Nonfarm Payrolls (NFP) report on Friday, will influence market expectations about the Fed's rate-cut path. This, in turn, should drive the USD demand in the near term and help determine the next leg of a directional move for the NZD/USD pair.