New Zealand Dollar hesitates around 0.5950 amid geopolitical uncertainty, higher Oil prices

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NZD/USD trades below last week's highs but remains steady above 0.5930 lows on Monday.
Stronger-than-expected Chinese inflation and trade balance data have provided support to the Kiwi.
Higher Oil prices are likely to keep NZD bulls in check.

The New Zealand Dollar (NZD) is trading below Friday’s highs against the US Dollar (USD) on Monday. Still, the NZD/USD pair holds within previous ranges, above the late April highs, in the 0.5930 area. Chinese economic data has been supportive, but the fading hopes of a swift end to the US-Iran war and the higher Oil prices are weighing on Kiwi bulls.

Chinese consumer inflation figures released earlier on Monday showed that price pressures accelerated to 1.2% year on year in April, against market expectations of a slowdown to 0.8% from March’s 1% reading. Beyond that, producer prices escalated to a three-year high at 2.8% year-on-year, up from 0.5% in March and above the 1.5% market consensus.

These figures show that prices are finally taking off, even though domestic consumption remains at moderate levels, easing concerns about deflation.

Beyond that, data released on Saturday revealed that Chinese exports rose sharply in April, amid higher demand for IA-related products, boosting the country’s trade balance. China is New Zealand’s main partner, and positive data from the world’s second-largest economy tend to provide support to the NZD.

Geopolitical reports, however, are rather disappointing. US President Donald Trump said that Iran’s latest peace proposal is “unacceptable”, which dampens hopes of an immediate end to the war and the reopening of the Strait of Hormuz. Oil prices have bounced up after the news. Brent Oil has climbed back above the $100 level, adding strain to New Zealand’s Oil-importing economy and weighing on risk appetite.

The ceasefire is still standing, though, and Trump is expected to visit his Chinese counterpart Xi Jinping this week to talk about Iran, Hormuz, nuclear weapons, and other topics, which, so far, is keeping a moderate optimism, although the market sentiment is cautious at the start of the week.

Economic Indicator

Consumer Price Index (YoY)

The Consumer Price Index (CPI), released by the National Bureau of Statistics of China on a monthly basis, measures changes in the price level of consumer goods and services purchased by residents. The CPI is a key indicator to measure inflation and changes in purchasing trends. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Renminbi (CNY), while a low reading is seen as bearish.

Economic Indicator

Producer Price Index (YoY)

The Producer Price Index released by the National Bureau of Statistics of China is a measurement of the rate of inflation experienced by producers. It captures the average changes in prices received by Chinese domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods). Changes in the PPI are widely considered as an indicator of commodity inflation. If the Producer Price Index increase is excesive, it would indicate that inflation has become a destabilizing factor in the economy, The People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, whereas a low reading is seen as negative (or bearish) for the CNY.