NZD/USD declines on risk-off mood, extends losses to near 0.6120

• NZD/USD loses ground as investors turn back toward US Dollar.
• The mixed Chinese data failed to improve the Kiwi Dollar.
• Traders await December’s US Retail Sales data to gain fresh impetus on the US economic landscape.

NZD/USD extends its losses on the third consecutive day, trading lower to near 0.6120 during the early European hours on Wednesday. The NZD/USD pair experiences downward pressure, influenced by risk aversion related to the geopolitical conflict in the Middle East. Additionally, there appears to be a slowdown in speculations over Federal Reserve (Fed) interest rate cuts in March, contributing to the downward pressure on the pair.

The New Zealand Dollar (NZD) faces downward pressure despite mixed data from China. China's annual Gross Domestic Product (GDP) grew by 5.2% in the fourth quarter, slightly below the expected 5.3%. December's Industrial Production (YoY) increased by 6.8%, surpassing the expected 6.6%. However, Retail Sales year-over-year came in at 7.4%, falling short of the market consensus of 8.0%.

The fear of weaker demand in China weighed on the Kiwi Dollar (NZD). The decline in Chinese consumer prices for a third consecutive month in December, along with a decrease in producer prices, contributed to concerns about economic conditions and demand in New Zealand's major trading partner, given the close economic ties between the two countries.

The US Dollar Index (DXY) holds steady around 103.50, supported by improved US Treasury yields, where the 2-year and 10-year yields stand at 4.26% and 4.07%, respectively. The risk-off sentiment is boosting demand for the US Dollar (USD), along with some assertive remarks from Federal Reserve (Fed) officials.

Traders are closely monitoring the upcoming US Retail Sales data for December, scheduled for release later in the day. This economic indicator provides insights into consumer spending patterns. Additionally, the release of the Fed's Beige Book and a speech by Fed's John C. Williams will be closely watched for further insights into the central bank's monetary policy stance.