NZD/USD rises close to 0.5900 after China Building Permits and Manufacturing PMI data.

• The NZD/USD appreciates when seasonally adjusted Building Permits increased by 5.4% month-on-month in July, recovering from a fall of 6%.
• The Caixin Manufacturing Purchasing Managers' Index for China rose to 50.5 in August from 49.5 in July.
• The US Dollar weakens as markets ramp up bets for a Federal Reserve rate cut in September.

The NZD/USD extends its gains for the third consecutive session, trading around 0.5900 during the early European hours on Monday. The pair appreciates as the New Zealand Dollar maintains gains following the release of seasonally adjusted Building Permits, which increased by 5.4% month-on-month in July, after a previous fall of 6%.

Additionally, the New Zealand Dollar also received support from a private survey indicating that the Chinese manufacturing sector unexpectedly returned to growth in August. The Caixin Manufacturing PMI rose to 50.5 in August from 49.5 in July. It is worth noting that any changes in the Chinese economy could influence the NZD, as China is a close trading partner of Australia.

The NZD/USD pair also surges as the US Dollar struggles against rising bets for a rate cut by the Federal Reserve at the September meeting. Traders will likely await a series of labor market releases this week that could determine the Fed's policy decision in September, including the ADP Employment Change, Average Hourly Earnings, and August Non-Farm Payrolls.

The president of the San Francisco Fed, Mary Daly, said on Sunday that policymakers will be ready to cut interest rates soon, adding that inflation derived from tariffs is likely to be temporary, according to Bloomberg. Traders now estimate more than an 87% chance of a 25 basis point cut by the Fed at the September meeting, up from 84% a week ago, according to the CME FedWatch tool.

CNN reported on Friday that the U.S. Court of Appeals for the Federal Circuit upheld a ruling declaring illegal the broad tariffs that President Donald Trump unilaterally imposed on most countries. The decision affects Trump's so-called “reciprocal” tariffs on most nations, including additional levies on China, Mexico, and Canada.

However, the U.S. Trade Representative, Jamieson Greer, said in an interview with Fox News on Sunday that President Trump's administration will likely continue negotiations with its trading partners despite the U.S. court ruling.

I wonder if this tariff situation could further complicate the already tense trade relations between the U.S. and its partners. Personally, I think the markets are too optimistic about the Fed's cuts, and we could see a sharp correction if the labor data turns out stronger than expected.