- Trade tensions are weighing over riskier assets including the NZD.
- US warns China on retaliation.
- New Zealand food inflation dropped in April.
NZD/USD is flashing red on the first trading day of the week with the Sino-US trade war showing little signs of de-escalation.
On Saturday, Trump warned China not to impose retaliatory tariffs or it would face worst terms, while adding further that he would live to collect bigger tariffs. Trump’s comments came a day after the US hiked tariffs on $200 worth of Chinese goods from 10 percent to 25 percent.
Meanwhile, China warned Trump on Sunday not to underestimate China’s will and endurance to fight. Further, it posted its own set of demands for further talks including the removal of extra tariffs imposed by the US on Friday.
The deadlock over negotiations seems to have blunted risk appetite. This is evident from the 29 point or 1% drop in the S&P 500 futures at press time.
The risk aversion is likely dragging the Kiwi lower. As of writing, the currency pair is trading at 0.6590, down 0.11% one the day, having clocked a high of 0.6614 on Friday.
New Zealand’s food inflation data released at 22.45 GMT on Sunday showed prices increased an annual 1% in April as a lift in minimum wage kicked in. Month-on-month, however, food prices fell 0.1%, following a 0.5% rise in March.
So far, however, the data has failed to move the needle on the NZD pairs with investors focused on trade tensions.
Pivot points
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