NZD/USD recovers from seven-month low on Chinese inflation, US budget deal

• NZD/USD rebounds after hitting a seven-month low near 0.5600.
• Chinese inflation picks up in October, supporting the New Zealand Dollar.
• The US budget deal eases concerns over a government shutdown.

NZD/USD strengthens on Monday, up 0.15% to around 0.5640 at the time of writing. The New Zealand Dollar (NZD) finds support after falling last week to a seven-month low at 0.5605, helped by a rebound in China's consumer prices and easing US-China trade tensions.

According to Monday's data, China's Consumer Price Index (CPI) rose 0.2% YoY in October, after a 0.3% decline in September, beating market expectations for a flat reading. The Producer Price Index (PPI) fell 2.1% in the same period, a smaller drop than forecast, suggesting a gradual improvement in domestic demand.

The Kiwi is also benefiting from a better trade outlook between China and the United States (US), after Beijing temporarily lifted its ban on the export of strategic metals such as Gallium, Germanium, and Antimony to the US. This suspension, effective until November 2026, is seen as a sign of easing technological tensions between the two powers.

Meanwhile, the US Dollar (USD) trades steady after the US Senate approved a stopgap bill to reopen the government and fund certain federal agencies until the end of January. The deal, backed by a group of centrist Democratic senators, is expected to improve household sentiment and reduce the risk of another budget standoff in the near term.

On the monetary front, Federal Reserve (Fed) Bank of San Francisco President Mary Daly said on Monday that the current Fed policy stance remains "well positioned" to support the economy, while reaffirming the central bank's vigilance against inflation. Her remarks helped keep the US Dollar in a holding pattern as markets assess the path of future rate cuts.

Overall, NZD/USD's recovery remains dependent on the strength of China's economic outlook and global risk appetite. Any deterioration in sentiment toward Asian growth or renewed US Dollar strength could cap the Kiwi's gains in the coming sessions.