NZD/USD posts modest gains to near 0.5800 as Trump trade risks loom

• NZD/USD edges higher to 0.5790 in Thursday’s early Asian session.
• Chinese authorities expect Yuan to weaken as US tariffs loom, weighing on the NZD. 
• Swaps traders are betting on a 25 bps rate cut at the Fed’s policy meeting next week.

The NZD/USD pair trades with mild gains around 0.5790 during the early Asian session on Thursday. Trump trade risks continue to undermine the China-proxy New Zealand Dollar (NZD). Traders await the release of the US November Producer Price Index (PPI) for fresh impetus, which is due later on Thursday. 

China's authorities are considering allowing the Chinese Yuan to depreciate in 2025 as they brace for potential higher US trade tariffs as Donald Trump returns to the White House. The weakening of the CNY translates into a softer NZD as New Zealand trades as proxies to China owing to the importance of China as an export market for New Zealand.

The US inflation, as measured by the Consumer Price Index, rose to 2.7% YoY in November from 2.6% in October, in line with the market consensus. The core CPI, excluding volatile food and energy prices, climbed 3.3% on an annual basis in November, compared to 3.3% during the same period. On a monthly basis, the headline CPI showed a 0.3% MoM, while the core CPI increased 0.3% MoM in November. 

Investors believe that this report was not high enough to keep the Federal Reserve (Fed) from cutting rates at its December meeting next week. Fed funds futures have priced in roughly 95% odds that the US central bank will lower rates in the December meeting, according to CME’s FedWatch Tool.