• NZD/USD is aiming to smash the critical hurdle of 0.5800 as Caixin Manufacturing PMI soars.
• China’s surprise purchase of government bonds will also strengthen kiwi exports.
•  A fifth consecutive 50 bps rate hike is expected by the RBNZ.

The NZD/USD pair has dropped marginally below 0.5730 in the Tokyo session after facing barricades around 0.5750. The asset is marching towards 0.5800 on upbeat China’s Caixin Manufacturing PMI data. The economic data has landed at 50.1, higher than the expectations and the prior release of 49.5.

It is worth noting that New Zealand is a leading trading partner of China and upbeat Caixin Manufacturing PMI data has a significant impact on NZ's fiscal balance sheet.

Apart from that, the Chinese Finance ministry is planning to issue government bonds worth 2.5 trillion yuan in the fourth quarter, as reported by Reuters. The decision is supposed to safeguard the markets from any further turmoil as the economy is not expected to display a decent growth rate amid zero tolerance for Covid-19 spread and the real estate crisis.  It will also support the kiwi export data.

Next week, investors will focus on the interest rate decision by the Reserve Bank of New Zealand (RBNZ). Reuters poll on RBNZ rate hike forecast claims a fifth consecutive rate hike by 50 basis points (bps). A fifth half-a-percent rate hike by the RBNZ Governor Adrian Orr will push the Official Cash Rate (OCR) to 3.5%. It would be worth watching whether an OCR above 3% is sufficient to anchor the galloping inflation.

Meanwhile, the US dollar index (DXY) is expected to decline further as it is facing barricades around 112.00 in the Tokyo session. The DXY has weakened after a consecutive decline in the US growth rate by 0.6%. Going forward, the Michigan Consumer Sentiment Index (CSI) data will be keenly focused. The sentiment data is expected to remain steady at 58.5.