NZD/USD holds positive ground above 0.5700 as China's deflation eases in September 

• NZD/USD strengthens to around 0.5720 in Wednesday's Asian session.
• China's CPI dropped more than expected in September. 
• A prolonged US federal shutdown could weigh on the US Dollar and act as a tailwind for the pair. 

The NZD/USD pair gains ground near 0.5720 during the Asian trading hours on Wednesday. Nonetheless, softer-than-expected Chinese consumer prices and rising trade tensions between the United States and China might cap the upside for the China-proxy New Zealand Dollar (NZD). 

Data released by the National Bureau of Statistics of China on Wednesday showed that China's Consumer Price Index (CPI) declined 0.3% YoY in September, compared to -0.4% in August. This figure came in below the market consensus of -0.1%. 

Meanwhile, Chinese CPI inflation rose 0.1% MoM in September versus 0% prior. The market consensus was for 0.2% in the reported period. The Producer Price Index (PPI) dropped 2.3% YoY in September, following a 2.9% fall in August, in line with the forecast. Softer inflation and persistent deflationary pressure in China could undermine the China-proxy Kiwi, as China is the largest trading partner for New Zealand. 

Furthermore, fresh tensions in the relationship between the US and China, the world's two largest economies, might also weigh on the NZD. Beijing vowed to retaliate after Washington threatened an additional 100% tariff on China last week.

On the other hand, the ongoing US government shutdown might drag the Greenback lower and create a tailwind for the cross. The Senate on Tuesday failed to reach the 60 votes needed to advance the House-passed bill to end the government shutdown and extend funding into next month, with no new Democrats offering their support.