New Zealand Dollar remains subdued following release of China’s economic data

• China’s August Retail Sales rose 0.4% YoY, missing expectations of 0.8% and down from July’s 0.6%.
• CME FedWatch Tool indicates the odds for a Fed rate hike surged above 92%, driven by August's CPI inflation data.
• US 10-year Treasury yields approached 5%, placing heavy pressure on non-yielding metals like Silver.

NZD/USD extends its losses for the second successive day, trading around 0.5760 during Asian hours on Tuesday. The pair remains as the New Zealand Dollar (NZD) holds losses following the release of key economic data from China, New Zealand’s close trading partner.

China’s Retail Sales rose 0.4% year-over-year (YoY) in August vs. a rise of 0.8% expected and a 0.6% growth in July. Industrial Production climbed 5.2% YoY in the same period, compared to the 4.8% forecast and 4.5% seen previously. Meanwhile, Fixed Asset Investment came in at -7.2% year-to-date (YTD) YoY in August, in line with the expected decrease of 7.2%. The July reading was a decline of 6.7%.

Moreover, the NZD/USD pair loses ground as the US Dollar (USD) receives support from rising expectations for a US Federal Reserve interest rate hike this week. Rising energy costs have intensified inflation concerns, placing greater pressure on the Fed to tighten monetary policy. As a result, money markets surged on Monday to reflect over a 92% chance of a rate hike, a sharp increase from roughly 60% just a week prior, based on data from the CME FedWatch tool.

Friday's economic data revealed that the US Consumer Price Index (CPI) rose in August, with core inflation recording its largest gain in four months. Moreover, the US 10-year Treasury yield surged toward 5% due to broader inflation and fiscal worries.