NZD/USD softens to near 0.5700 on China's deflationary pressures

• NZD/USD loses ground to near 0.5710 in Monday’s Asian session. 
• China's deflationary pressures deepen in February, weighing on the Kiwi. 
• Concerns about the US economic outlook after weaker US employment data might cap the pair’s downside. 

The NZD/USD pair edges higher to around 0.5715 during the Asian trading hours on Monday. The softer-than-expect Chinese inflation data weighs on the New Zealand Dollar (NZD). The US Consumer Price Index (CPI) inflation data for February will be the highlight on Tuesday. 

China's CPI in February missed expectations and fell at the sharpest pace since January 2024. The CPI fell 0.7% in February from a year earlier, reversing January's 0.5% increase, data from the National Bureau of Statistics (NBS) showed on Sunday.

"China's economy still faces deflationary pressure. While sentiment was improved by the developments in the technology space, domestic demand remains weak," said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. The sluggish household demand and weak consumption have raised concern about the world's second-largest economy, which exerts some selling pressure on the China-proxy Kiwi as China is a major trading partner to New Zealand.  

The weaker-than-expected US February Nonfarm Payrolls (NFP) data suggested that the Federal Reserve (Fed) remained on track to cut interest rates multiple times this year. This, in turn, might undermine the Greenback and create a tailwind for NZD/USD. Financial markets expect the central bank to resume rate cuts in June, though much would depend on inflation.

San Francisco Fed President Mary Daly on Friday highlighted the growing uncertainty among businesses but said with the economy and interest rates being in a "good place," the Fed should not make any reactionary moves. Meanwhile, Fed Chairman Jerome Powell said Friday that the US central bank can wait to see how President Donald Trump’s aggressive policy actions play out before it moves again on interest rates. Powell added that policy uncertainty makes it difficult for the US central bank to enact policy adjustments.