NZD/USD strengthens to near 0.6050 as traders await outcome of US-China trade talk

• NZD/USD gains ground to around 0.6055 in Wednesday's early Asian session.
• Investors brace for the outcome of US-China trade talks. 
• Deepening deflation risk in China could weigh on the New Zealand Dollar. 

The NZD/USD pair trades in positive territory near 0.6055 during the early Asian session on Wednesday. Hopes that trade talks between the United States (US) and China were going well provide some support to the China-proxy New Zealand Dollar (NZD). The US Consumer Price Index (CPI) inflation data for May will take center stage later on Wednesday. 

Investors await the outcome of trade policy talks between the US and China, the world's two largest economies. US Commerce Secretary Howard Lutnick said that the US and China have reached a framework to implement the Geneva Consensus, but they will go back and see if US President Donald Trump approves it

Trump commented earlier this week that China is "not easy," but the US is "doing well" in the negotiations. Optimism surrounding US-China negotiations underpins the China-proxy Kiwi, as China is a major trading partner of New Zealand.

Traders will take more cues from the US CPI inflation report on Wednesday. The headline CPI is expected to see an increase of 2.5% YoY in May, while the core CPI is estimated to see a rise of 2.9% YoY in the same period. This report could offer some hints about further insight into the US economy. 

"Ultimately this report is not expected to cause any significant changes to the Fed's current wait-and-see approach when it comes to setting rates," said Sam Millette, director of fixed income at Commonwealth Financial Network. 

China's producer deflation deepened to its worst level in 22 months, while consumer prices extended their decline, weighing on the NZD. China's CPI dropped at an annual pace of 0.1% in May after declining 0.1% in April, the National Bureau of Statistics of China reported on Monday. The market consensus was for a 0.2% decrease in the reported period. Meanwhile, PPI fell 3.3% YoY in May, following a 2.7% decline in April. The data came in lower than the market consensus of 3.2%.