NZD/USD holds losses below 0.5950 ahead of US CPI data

• NZD/USD remains subdued as traders adopt caution ahead of US inflation data due on Tuesday.
• The US Consumer Price Index is expected to climb 0.2% MoM, easing from the 0.3% gain recorded in June.
• The New Zealand Dollar weakened after Prime Minister Christopher Luxon remarked that US tariff relief is unlikely.

NZD/USD extends its losses for the second successive session, trading around 0.5930 during the early European hours on Tuesday. The pair faces challenges as the US Dollar (USD) remains stable amid market caution ahead of the US consumer inflation data, due later in the North American session.

The July US Consumer Price Index (CPI) is forecast to rise 0.2% month-over-month, slightly below June's 0.3% increase, while the annual rate is projected to accelerate for the third consecutive month to 2.8%. Core CPI is also anticipated to pick up to 0.3%.

Traders raise their bets on pricing in two interest rate cuts by the US Federal Reserve (Fed) in 2025, boosted by weaker data on US jobs and PMI. Markets are now pricing in approximately 84% odds of a Fed rate cut at the September meeting, down from 90% a week ago, according to the CME FedWatch tool.

The NZD/USD pair remains subdued as the New Zealand Dollar (NZD) struggles after New Zealand (NZ) Prime Minister Christopher Luxon recently commented that US tariff relief is unlikely, following a hike in tariffs on the country's exports to 15% from 10%.

However, the downside of the NZD/USD could be restrained as the New Zealand Dollar may draw support from improved global trade sentiment, as the Trump administration agreed to postpone the implementation of sweeping tariffs on China for an additional 90 days. It is important to note that any change inthe Chinese economy could impact the NZD as China and New Zealand are close trade partners.

The decision came just hours before the previous agreement between the world's two largest economies was set to expire. In response, China's Commerce Ministry announced it would suspend additional tariffs on US goods for the same period, following Trump's executive order extending the tariff truce.