NZD/USD edges lower to near 0.6230 on risk averse sentiment

• NZD/USD retraces its gains on risk-averse sentiment due to the Middle East situation.
• Softer US PPI data boosted the market sentiment toward the Fed rate cut.
• Chinese inflation remains in deflationary territory, keeping the antipodean currencies, including the New Zealand Dollar (NZD).

NZD/USD snaps its two-day winning streak as market sentiment shifts to risk-averse on escalated geopolitical tension in the Middle East. The NZD/USD pair trades lower near 0.6230 during the Asian session on Monday. However, the softer Producer Price Index (PPI) data reinforces market sentiment regarding the possibility of the Federal Reserve (Fed) initiating monetary policy easing. This sentiment has contributed to a weakening of US bond yields, subsequently putting downward pressure on the US Dollar (USD).

Iran-led Houthis launched an anti-ship cruise missile at the USS Laboon in the Red Sea on Monday. This development has contributed support for the Greenback, a safe-haven currency during times of heightened geopolitical uncertainty.

According to the US Bureau of Labor Statistics, the December Producer Price Index (PPI) figure was 1.0% year-on-year, surpassing the previous reading of 0.8%. The Core PPI year-on-year arrived at 1.8%, down from 2.0% in November. The monthly headline and Core PPI indices remained at a 0.1% decline and 0.0%, respectively. These figures indicate a less robust inflationary environment, contributing to the perception of potential monetary policy easing by the Federal Reserve and impacting the US Dollar.

On the New Zealand Dollar (NZD) front, with the absence of high-impact data during the last week, Chinese data was released on Friday. China's Consumer Price Index (YoY) remained in deflationary territory for the third consecutive month in December.

Additionally, the Chinese Producer Price Index (PPI) experienced a decline for the 15th consecutive month. These developments fuel speculations about the potential for additional government stimulus and provide a modest lift to antipodean currencies, including the New Zealand Dollar (NZD). NZIER Business Confidence and GDT Price Index are scheduled to be released on Friday.