NZD/USD weakens to near 0.6050 on risk-off mood, escalating Middle East geopolitical tensions

• NZD/USD attracts some sellers to around 0.6065 in Friday’s early Asian session. 

• Risk-off sentiment weighs on the New Zealand Dollar. 

• Progress on a US-China trade deal might cap the downside for the China-proxy Kiwi. 

The NZD/USD pair trades in negative territory near 0.6065 during the early Asian session on Friday. The New Zealand Dollar (NZD) softens against the US Dollar (USD) as losses in equity markets dampened risk sentiment. The advanced US Michigan Consumer Sentiment will be in the spotlight later on Friday. 

The cautious mood and rising geopolitical tensions in the Middle East exert some selling pressure on riskier assets like the NZD. Israel is prepared to attack Iran in the coming days if Tehran rejects a US proposal to limit its nuclear program, the Wall Street Journal (WSJ) reported late Thursday, citing US and Israeli officials.

After two days of negotiations, the United States (US) and China agreed to a preliminary deal on how to implement the consensus the two sides reached in Geneva. That agreement paused US President Donald Trump’s 145% tariff on China and China’s 125% tariff on US exports, reducing them to 30% and 10%, respectively.  Positive developments surrounding the world’s two largest economies might underpin the China-proxy Kiwi, as China is a major trading partner of New Zealand. 

The weakness in the Greenback after cooler-than-expected US inflation data could also help limit the pair’s losses. The US Producer Price Index (PPI) rose 0.1% MoM in May, compared to a decline of 0.2% (revised from -0.5%), the Bureau of Labor Statistics reported on Thursday. This reading came in softer than the expectation of a 0.2% rise. Meanwhile, the core PPI, excluding food and energy, increased 0.1% MoM in May versus -0.2% prior (revised from -0.4%), below the consensus of 0.3%.