NZD/USD price struggles below $0.57 after CPI data release
NZD/USD retreats as Trump’s China tariff threats pressure Kiwi.
The New Zealand Dollar (NZD) is encountering headwinds as global developments, including potential US tariff increases on China and the Reserve Bank of New Zealand's (RBNZ) dovish stance, shape market sentiment.
The NZD/USD pair saw a 0.5% decline from 0.5700 in the Asian session on January 22 and is currently recovering during the European session, trading around 0.5665.
US President Donald Trump has revived discussions on imposing a 10% tariff on Chinese imports, set to take effect on February 1. The potential tariff, driven by concerns over fentanyl being sent from China to Mexico and Canada, has sparked caution in global markets, particularly for the NZD, which is closely tied to trade with China. New Zealand's dependence on its trading relationship with China makes this tariff development a key risk factor for the Kiwi.
NZD/USD price dynamics (November 2024-January 2025). Source: TradingView.
NZD/USD price outlook: Dovish RBNZ weighs on the New Zealand dollar
On the domestic front, New Zealand's Consumer Price Index (CPI) inflation for December exceeded expectations. While the inflationary pressure was slightly higher than anticipated, it doesn't appear to be enough to deter the RBNZ from pursuing another aggressive rate cut. The market is now pricing in a 90% likelihood of a 50-basis point reduction in February, following a series of cuts earlier in the cycle. These dovish expectations for New Zealand monetary policy continue to weigh on the New Zealand dollar.
Technically, the daily chart Relative Strength Index (RSI) remains neutral, showing no clear directional bias. However, the 4-hour chart RSI is currently in bullish territory, suggesting that a retest of the 0.5700 resistance is likely. If the pair breaks above this level, it could signal a shift toward a bullish outlook, targeting higher levels. However, should the price fail to breach 0.5700 and reverse, the near-term support level at 0.5590 (the lowest point of 2024) will come into focus.
The NZD/USD pair traded near 0.5650 during early Tuesday’s European session, marking a 0.53% intraday drop. Trump's remarks about tariffs weighed heavily on the New Zealand dollar (NZD).
