NZD/USD gains momentum above the 0.5900 mark, investors await the US CPI

• NZD/USD holds above the 0.5900 mark amid the weakening USD.
• New Zealand’s Food Price Index (FPI) for August rose by 0.5% MoM vs. -0.5% prior.
• The Greenback may benefit from the higher for longer interest rate narrative in the US.
• Traders await the US Consumer Price Index (CPI) data on Wednesday.

The NZD/USD pair gains traction above the 0.5900 during the early Asian session on Wednesday. A decline in the US Dollar (USD) lifts the New Zealand Dollar (NZD) ahead of the US Consumer Price Index (CPI). Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD versus a basket of global currencies, hovers around 104.50 after retracing from a 104.90 high.

The latest data from Statistics New Zealand revealed on Wednesday that the Food Price Index (FPI) for August rose by 0.5% MoM from a 0.5% drop in the previous month. Earlier this week, the nation’s Electronic Card Retail Sales for August came in at 3.7% YoY from 2.2% in the previous reading, while the monthly figure grew 0.7% versus 0% prior. The Visitor Arrivals for July came in at 59.3% YoY from the previous reading of 88.5%. However, the Kiwi did not react to the figures, and the headline surrounding the US-China relationship and China’s economic condition will influence the Kiwi for the time being.

Furthermore, US Commerce Secretary Gina Raimondo is set to meet with the CEOs of key American corporations this week, two weeks after visiting China and raising worries about business conditions, per Reuters. The renewed trade war tension between the US and China might exert some selling pressure and act as a headwind for the China-proxy New Zealand Dollar (NZD).

On the US Dollar front, the Greenback may benefit from the higher for longer interest rate narrative in the US. According to the CME Fedwatch Tool, traders expect the Federal Reserve (Fed) to keep the interest rate unchanged in September at 5.25%-5.50%, with a 93% chance. However, the market has priced in a 56% chance that the Fed will hold its current monetary policy unchanged in its November meeting.

The US Consumer Price Index (CPI) for August will be in the spotlight on Wednesday. The annual figure is anticipated to rise from 3.2% to 3.6%, while the core figure is expected to fall from 4.7% to 4.3%. The data might trigger volatility in the FX market and influence an expectation on the Federal Reserve's monetary policy.

Moving on, market players will closely watch the US Consumer Price Index (CPI) data on Wednesday. Later this week, the US Retail Sales and Producer Price Index (PPI) will be released on Thursday. Also, New Zealand’s Business NZ PMI for August will be due on Friday. These figures could give a clear direction to the NZD/USD pair.