NZD/USD trims a part of NZ CPI-led gains, holds above mid-0.6000s amid subdued USD demand

• NZD/USD gains strong positive traction following the release of the NZ CPI on Wednesday.
• The risk-on mood and subdued USD price action provide an additional boost to the major.
• Bets for early RBNZ rate cuts and China’s economic woes keep a lid on any meaningful gains.

The NZD/USD pair stages a solid recovery from over a two-month low touched during the Asian session on Wednesday, albeit it lacks follow-through buying and remains below the 0.6100 round figure. Nevertheless, spot prices, for now, seem to have snapped a two-day losing streak and currently trade around the 0.6065 area, still up over 0.30% for the day.

Despite the softer-than-expected Consumer Price Index (CPI) released from New Zealand earlier today, non-tradable inflation pointed to persistent domestic pricing pressures and offered some support to the New Zealand Dollar (NZD). Apart from this, the upbeat market mood, which tends to benefit the risk-sensitive Kiwi, prompts some intraday short-covering move around the NZD/USD pair. 

The US Dollar (USD), on the other hand, is undermined by expectations that the Federal Reserve (Fed) will start cutting interest rates in September. This, to a larger extent, overshadowed the better-than-expected US Retail Sales figures released on Tuesday and keeps the US Treasury bond yields depressed near a multi-month low, which undermines the buck and lends support to the NZD/USD pair. 

Meanwhile, market participants brought forward the likely timing of interest rate cut by the Reserve Bank of New Zealand (RBNZ) in reaction to the weaker CPI report. Apart from this, China's economic woes, which tend to dent demand for antipodean currencies, including the Kiwi, further contribute to capping the upside for the NZD/USD pair and warrants some caution for bullish traders.