New Zealand Dollar holds gains following China Trade Balance data

NZD/USD remains stronger for the second successive day, trading around 0.5830 during the early European hours on Tuesday. The pair appreciates as the New Zealand Dollar (NZD) receives support from China's Trade Balance data, which, in Chinese Yuan (CNY) terms, arrived at CNY723.98 billion for May, widening from the previous figure of CNY585.69 billion. Exports rose 13.8% YoY in May vs. 9.8% in April. The country’s imports climbed 21.5% YoY in the same period vs. 20.6% previously.

In US Dollar terms, China's Trade Surplus widened far more than anticipated in May, reaching $105.43 billion against an expected $92.1 billion and a previous reading of $84.82 billion. This strong performance was driven by a robust acceleration in both trade segments: year-over-year exports surged by 19.4%, easily beating the 15.0% consensus, while imports jumped 27.4%, outpacing the projected 25.0% growth rate.

The NZD/USD pair gains ground as the US Dollar (USD) loses ground after Iran and Israel agreed to halt mutual attacks. The de-escalation came after an appeal from US President Donald Trump, boosting hopes that peace negotiations could move forward.

However, the US Dollar may regain ground amid uncertainty surrounding the Middle East ceasefire. Israeli Prime Minister Benjamin Netanyahu stated the war against Iran and its Lebanon-based proxy, Hezbollah, "has not yet ended," though he insisted both entities are weaker than ever. Netanyahu’s remarks followed a statement from Iran’s military confirming it had ceased strikes against Israel. Nevertheless, Iran’s central military command issued a stern warning, declaring that if Israel continues its attacks, including those in southern Lebanon, "much harsher and more crushing actions than before will be on the way."

The ongoing geopolitical friction, combined with strong US jobs data, has fueled inflation fears and heightened expectations of Federal Reserve rate hikes. According to the CME FedWatch tool, traders have raised the probability of a December quarter-point rate hike to 43%, up from 14% a month ago. The market is now bracing for Wednesday's US Consumer Price Index (CPI) and Thursday's Producer Price Index (PPI) data to gauge the Fed's next move.