NZD/USD trades with mild gains near 0.5600 as traders await US CPI data

• NZD/USD trades with mild gains around 0.5600 in Wednesday’s Asian session. 
• US PPI came in softer than expected last month. 
• Expectations that Trump will impose graduated tariffs increasing by about 2% to 5% a month might help limit the pair’s losses. 

The NZD/USD pair posts modest gains to near 0.5600 on Wednesday during the Asian trading hours. The cooler-than-expected US December Producer Price Index (PPI) inflation data drags the US Dollar (USD) lower and creates a tailwind for the pair. 

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, weakens to around 109.20 after the PPI report. Data released by the US Bureau of Labor Statistics on Tuesday showed that the PPI rose by 3.3% YoY in December, compared to 3.0% in November. This reading came in softer than the market expectation of 3.4%. Meanwhile, the core PPI, excluding the volatile prices of food and energy, climbed 3.5% in December versus 3.4% prior, below the market consensus of 3.8%. 

Traders will shift their attention to the US December Consumer Price Index (CPI) inflation report, which is due later on Wednesday. A surprise upside in inflation could trigger the US Federal Reserve's (Fed) hawkish bets, supporting the Greenback and US Treasury yields. The potential US tariffs by Donald Trump and the new administration remained in the spotlight.

On the Kiwi front, reports published by Bloomberg suggested Trump might take a more strategic approach to imposing trade tariffs, which might bring some relief to the New Zealand Dollar (NZD). "Currency markets are breathing a sigh of relief after a report suggested that the incoming Trump administration could follow a 'gradual' trajectory in ratcheting tariffs higher," said Karl Schamotta, a foreign exchange analyst at Corpay.