• NZD/USD depreciates due to increased risk aversion ahead of the release of ISM Manufacturing PMI.
• Fed Chair Jerome Powell stated that a rate cut in September is "on the table."
• The Kiwi Dollar may struggle as the latest inflation data raises expectations of an RBNZ’s rate cut by October.

NZD/USD retraces its two days of gains, trading around 0.5940 during the European session on Thursday. This decline is attributed to the improved US Dollar (USD) due to a recovery in US Treasury yields. Traders adopt caution ahead of ISM Manufacturing PMI and weekly Initial Jobless Claims from the United States (US), both set to be released later in the North American session.

However, the downside of the NZD/USD pair could be restrained as the US Dollar may face challenges due to the dovish sentiment surrounding the Federal Reserve’s (Fed) policy trajectory. At Wednesday’s policy meeting, the Fed decided to keep rates unchanged in the 5.25%-5.50% range.

Additionally, Federal Reserve Chairman Jerome Powell stated that a rate cut in September is "on the table," during a press conference. Powell added that the central bank will closely monitor the labor market and remain vigilant for signs of a potential sharp downturn, per Reuters