NZD/USD price slides as RBNZ inflation data disappoints and Trump renews tariff threats
Kiwi drops to 0.5650 amid Trump tariff threats and poor New Zealand PSI
The NZD/USD pair fell to near 0.5650 in early Wednesday trading as the New Zealand dollar (NZD) faced renewed selling pressure following the Reserve Bank of New Zealand’s (RBNZ) Sectoral Factor Model Inflation report. The core inflation gauge extended its decline, registering a 3.1% year-over-year (YoY) increase for Q4 2024, down from 3.4% in Q3.
With the RBNZ targeting an inflation range of 1% to 3%, this softer reading intensified expectations for additional monetary easing.
Swaps markets now indicate a 90% probability of a 50 basis points (bps) rate cut at the RBNZ’s February meeting, with the central bank projected to implement 100 bps in total cuts for 2025. This dovish stance has added downward pressure on the Kiwi.
NZD/USD price dynamics (Dec 2024 - Jan 2025) Source: TradingView.
Trump tariff threats intensify pressure on Kiwi
The NZD also faltered as U.S. President Donald Trump proposed a 10% tariff on Chinese goods starting February 1. Trump’s remarks about fentanyl shipments from China to North America further fueled tensions. As China is New Zealand’s largest trading partner, such tariff threats directly impact the Kiwi’s performance, amplifying concerns about weaker global trade conditions.
Despite higher-than-expected New Zealand Consumer Price Index (CPI) inflation for December, the data failed to offset the dovish market sentiment surrounding the RBNZ’s aggressive rate-cut trajectory. Meanwhile, the U.S. dollar (USD) benefited from its safe-haven appeal amid the geopolitical uncertainty.
Market outlook remains cautious
With the RBNZ signaling further easing and geopolitical tensions rising, the NZD/USD outlook remains clouded. Investors will closely monitor the developments in US-China tariff negotiations and the RBNZ's monetary policy decisions. The Kiwi's trajectory may depend on global risk sentiment and the broader U.S. dollar strength.
In our earlier analysis, we discussed how steady rates from the People’s Bank of China (PBoC) and dovish Federal Reserve expectations provided temporary support for NZD/USD. However, current challenges, including weak domestic data and global trade concerns, continue to dominate the narrative.
