NZD/USD gains ground above 0.5900 on weaker US Dollar, risk-on mood

• NZD/USD holds positive ground around near 0.5910 on the weaker USD on Monday. 
• The recent New Zealand inflation data prompted speculation that the RBNZ might cut its rate in November.
• Fed’s Goolsbee signaled a longer timeline for interest rate cuts as progress on inflation had “stalled”. 

The NZD/USD pair gains momentum near 0.5910 on Monday during the early Asian session. The recovery of the pair is bolstered by the risk-on sentiment and modest decline of the US dollar (USD). Traders await more evidence of inflation data for cues on the rates path ahead of a policy decision next week. The US Core Personal Consumption Expenditures Price Index (PCE) for March will be due on Friday.

The New Zealand inflation data last week showed that inflation has continued to fall, but remains above the Reserve Bank of New Zealand’s (RBNZ) target range of 1 to 3%. This triggered the expectation that the RBNZ might cut its Official Cash Rate (OCR) from the November meeting and provide some support to the New Zealand Dollar (NZD). 

Furthermore, both Israel and Iran downplayed the possibility of escalating conflicts in the Middle East after Israel's apparently small strike on Iran, per Reuters. This development contributes to improving market sentiment and lifts riskier assets like the Kiwi. 

On the other hand, Chicago Federal Reserve (Fed) President Austan Goolsbee on Friday hinted at a longer timeline for interest rate cuts as progress on inflation had “stalled". Goolsbee further stated that Inflation has significantly dropped from its pandemic-era peak of 9.1%, but remains stubbornly above the Fed’s target. The high-for-longer US rate narrative boosts the Greenback and creates a headwind for the NZD/USD pair.

On Monday, China's Ministry of Commerce implemented a new tariff on US imports. China has imposed a 43.5% tax on imports of propionic acid from the US. This chemical is widely used in a variety of industries, including food, feed, pesticides, and medicinal applications. The NZD/USD pair drifts higher despite the renewed trade war between the US and China.