NZD/USD flat lines around the 0.6170-75 area, just above the two-week low set on Friday

• NZD/USD struggles to attract buyers despite modest USD gains and a less risk-off tone.
• The mixed Chinese inflation figures are not exactly positive for the optimists and do not give them any boost.
• The fundamental background warrants caution before placing aggressive, targeted bets.

The NZD/USD pair is failing to benefit from a modest gain in the Asian session and is currently trading around the 0.6175-0.6170 region, just above the two-week low reached on Friday.

The US dollar (USD) is gaining positive traction on the first day of a new week, building on Friday’s recovery from a more than one-week low, which is in turn seen as a headwind for the NZD/USD pair. Mixed US jobs data has forced investors to scale back expectations for a bigger rate cut by the Federal Reserve (Fed) in September. This is leading to a modest rise in US Treasury yields, which, together with a softer risk tone, is supporting the safe-haven greenback.

The closely watched US Nonfarm Payrolls (NFP) provided further evidence of a sharp deterioration in the labour market and fuelled concerns about a slowdown in the world’s largest economy. This in turn is dampening investors’ appetite for riskier assets, which is expected to benefit traditional safe haven currencies and keep a lid on meaningful gains for the risk-sensitive Kiwi. Meanwhile, markets reacted little to the latest Chinese inflation figures released earlier on Monday.

China’s consumer price index (CPI) came in at 0.4% MoM in August, rising at an annual rate of 0.6%, slightly up from the 0.5% growth reported in the previous month. However, this was lower than consensus estimates for a reading of 0.7%. Moreover, China’s producer price index (PPI) fell 1.8% YoY during the reported month compared to the 0.8% decline recorded in July and was worse than the market forecast of -1.4%.

However, it remains to be seen whether the USD can build on the momentum amid growing acceptance that the Fed will begin its rate-cutting cycle at the September 17-18 policy meeting. Moreover, the aforementioned fundamental backdrop makes it prudent to wait for strong follow-on selling before positioning for an extension of the recent corrective decline from near the 0.6300 round figure, or the highest level since early January reached last month.