NZD/USD remains in a defensive mood above the 0.5900 mark following New Zealand Trade data

• NZD/USD remains on the defensive near 0.5925, up 0.25 on the day.
• New Zealand Trade balance recorded a deficit of $15,810B in July YoY compared with a deficit of $-16.11B.
• China would arrange financial support to resolve local government debt worries.
• New Zealand Retail Sales, Federal Reserve (Fed) Chairman Jerome Powell Speaks will be the focus for traders.

The NZD/USD pair breaks below the psychological round mark of 0.6000 and remains under pressure during the early Asian session on Monday. The pair bounces off the lowest level since November 2023 at 0.5903 and currently trades near 0.5926, gaining 0.27% for the day.

The latest data from Statistics New Zealand on Monday showed that the nation’s Trade balance recorded a deficit of $15.81B in July YoY compared with a deficit of $-16.11B in the previous month. Exports fell to $5.45bn in July from $6.18B in the previous month, while Imports expanded to $6.56B from $6.29B prior.

The Reserve Bank of New Zealand (RBNZ) kept the benchmark interest rates unchanged at 5.5%, as expected on Wednesday. RBNZ Governor Adrian Orr also offered a hawkish signal to rein in rising inflation expectations and stated that the interest rate will remain at a restrictive level for some time.

Furthermore, the People's Bank of China (PBOC) said on Sunday that China would arrange financial support to resolve local government debt worries, according to Reuters. Market participants will focus on the development of this headline. The positive development might alleviate the concern about the spillover effects of China’s debt crisis and real-estate woes. This, in turn, could limit the downside of the Kiwi and acts as a tailwind for the NZD/USD pair.

On the other hand, the stronger-than-expected US data last week strengthen the case for another interest rate rise by the Federal Reserve (Fed). FOMC Minutes emphasized on Wednesday that inflation remained unacceptably high and additional monetary policy tightening may be required to bring inflation to the target. The more hawkish stance from the Fed could lift the Greenback against its rival.

Looking ahead, the New Zealand Retail Sales will be due on Wednesday and the Federal Reserve (Fed) Chairman Jerome Powell will speak at the Jackson Hole Symposium on Friday. His speech will offer hints about further monetary policy guidance and give a clear direction for the NZD/USD pair. Meanwhile, risk sentiment remains the main driver for the pair.