• NZD/USD is moving higher into the next critical US data.
• The US dollar has been bleeding out following poor US data and the Fed. 

NZD/USD is trading at 0.6291 and a touch higher in early Asia ahead of the Tokyo equities open. The pair has benefitted from a friendlier environment in the commodities and equities space following the Federal Reserve meeting on Wednesday and a statement that left the futures markets tied to Fed policy expectations tilted towards a more moderate increase for the next meeting.

The Fed has led to a softer US dollar which is now treading water around the lower quarter of the 106 area as per DXY, an index that measures the greenback vs. a basket of major currencies. Markets were also digesting the weaker US growth data following on from the Fed chairman's relatively dovish comments the prior day. On Thursday, the US Gross Domestic Product was reported to have fallen at a 0.9% annualized rate last quarter, the Commerce Department said in its advance estimate of GDP. Economists polled by Reuters had forecast GDP rebounding at a 0.5% rate.

For the end of the week, US inflation and wages data will be pivotal, analysts at ANZ Bank say – ''any signs of weakness will likely only exacerbate the recent rally in rates and top out DXY.''

Domestically, the second quarter labour market data are released next Wednesday (3 August). The analysts at ANZ Bank said that they anticipate that the data will confirm the ongoing labour market tightening seen in timely indicators, survey data, and anecdotes.

''We expect unemployment declined to 2.8% in Q2 (vs. 3.2% in Q1). And while we can’t discount that typical HLFS volatility could see unemployment come in above our expectation, risks are skewed towards a still-lower number.''

They explained that the tight labour market is turning into an increasingly intense headache for the Reserve Bank of New Zealand.

''The gaping chasm between labour demand and supply is likely to be a key driver of persistently too-high domestic inflation pressure over the next year. We expect ongoing 50bp hikes will bring the OCR to 4% by year-end. That’s consistent with market pricing, but a stronger-than-expected jobs report could see a market reaction nonetheless.''