• NZD/USD jumps on Monday and trades around 0.5850, ending a four-day losing streak.
• Strong Chinese retail and industrial data support Asia-linked currencies.
• Markets continue to assess the possibility of a rate hike by the RBNZ later this year.

NZD/USD rises on Monday and trades around 0.5850 at the time of writing, up 1.42% on the day. The pair rebounds after several days of decline, supported by improving risk sentiment and macroeconomic factors favorable to the New Zealand Dollar (NZD).

The New Zealand currency is notably supported by the release of solid economic data from China, New Zealand’s key trading partner. Data published by the National Bureau of Statistics (NBS) showed that Retail Sales increased by 2.8% YoY in February, beating market expectations of 2.5% and improving significantly from the previous 0.9% reading. At the same time, Industrial Production rose by 6.3% annually, also exceeding forecasts of 5.1%. These figures strengthen expectations for demand for New Zealand exports and support the Kiwi.

Markets are also closely watching the monetary policy outlook of the Reserve Bank of New Zealand (RBNZ). Investors continue to price in a possible tightening later this year, with some scenarios already incorporating a 25-basis-point rate hike around September and a meaningful probability of another increase by the end of the year.

Meanwhile, the US Dollar (USD) weakens against most of its major peers. The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, pulls back from recent highs and slips back below the 100 level. Improving market sentiment contributes to the softer tone of the US currency.

This improvement in risk appetite comes as geopolitical tensions related to the Middle East appear to ease slightly. Reports suggest that the United States (US) may announce the creation of an international coalition to escort ships through the Strait of Hormuz, a move that could help secure global energy flows and ease concerns about supply disruptions.

Investors nevertheless remain cautious ahead of the next monetary policy decision from the Federal Reserve (Fed), as markets continue to adjust their expectations for interest rate cuts in the months ahead.