NZD/USD price strengthens near $0.56 as market eyes Trump policies
NZD/USD rises near 0.5600 as PBoC holds rates
βThe NZD/USD pair climbed toward 0.56, gaining 0.20% in early Asian trading on Monday, driven by positive sentiment surrounding the New Zealand dollar. The Kiwi found support after the Peopleβs Bank of China (PBoC) decided to leave its one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.35% and 3.85%, respectively.Β
This stability in Chinese monetary policy reassured markets, as China remains New Zealandβs largest trading partner. However, investor caution is rising ahead of President-elect Donald Trumpβs inauguration, with potential tariff policies likely to influence currency dynamics.
NZD/USD price dynamics (Dec 2024 - Jan 2025) Source: TradingView.
Trump Tariff Policies in Focus
Donald Trumpβs upcoming policy announcements are a significant factor for global markets. In December, the President-elect proposed tariffs of up to 10% on global imports, a 60% surcharge on Chinese goods, and a 25% import tax on Canadian and Mexican products. Any aggressive tariff measures could unsettle market sentiment, offering potential support to the US dollar while weighing on risk-sensitive currencies like the Kiwi.
Peter Dragicevich, a currency strategist at Corpay, emphasized the potential impact of a forceful start to Trumpβs presidency, which could βrattle nervesβ and boost the dollarβs appeal as a safe haven. For the NZD/USD pair, further developments on Trumpβs policies will be pivotal, given the economic ties between New Zealand and China.
Fed Dovishness Caps USD Strength
Meanwhile, dovish expectations from the Federal Reserve could limit the upside for the US dollar. Fed Governor Christopher Waller hinted at the possibility of a rate cut in March, contingent on further moderation in inflation data. With softer inflation figures already influencing market sentiment, the U.S. dollar may face pressure in the near term, providing additional tailwinds for the NZD/USD.
The NZD/USD pairβs trajectory will hinge on upcoming developments in Chinese economic data, Trumpβs policy announcements, and the Fedβs monetary stance. A break above the 0.56 level could signal further gains for the Kiwi, but caution remains as geopolitical and economic risks loom large.
In our prior analysis, we discussed the positive impact of Chinaβs robust GDP growth and dovish Fed remarks on the NZD/USD pair. These factors continue to shape its outlook.
