NZD/USD price rises to near 0.5700 on Trump’s optimistic tone toward China
NZD/USD climbs near 0.5700 as Trump signals a softer tone on tariffs
The New Zealand dollar (NZD) surged above 0.5700 during Friday’s European session as U.S. President Donald Trump adopted a softer tone toward China, hinting at the possibility of a trade deal without imposing tariffs. In a Thursday interview with Fox News, Trump described his discussion with China on topics like TikTok, trade, and Taiwan as “friendly,” signaling a move that boosted the Kiwi’s appeal given New Zealand's strong trade ties with China.
Trump’s comments represent a shift from his earlier threats during his inauguration, where he proposed a 10% tariff on Chinese imports and 25% tariffs on Canada and Mexico. His latest statements have eased fears of escalating trade tensions, leading to a decline in the U.S. dollar Index (DXY) to 107.55, its lowest in nearly a month.
NZD/USD price movement (Dec 2024 - Jan 2025) Source: TradingView.
U.S. dollar under pressure amid Trump’s rate cut endorsement
The U.S. dollar (USD) faced additional selling pressure following Trump’s speech at the World Economic Forum (WEF) in Davos, where he endorsed immediate global interest rate cuts. While Trump argued for rate reductions to counter falling oil prices, the Federal Reserve (Fed) is expected to maintain its independence and stay the course on its current monetary policy.
Despite Trump’s rhetoric, the Fed is likely to keep its policy unchanged at its January meeting, leaving rates in the 4.25%-4.50% range. This perceived stability contrasts with the U.S. dollar’s recent vulnerability, as the softening stance on tariffs diminished its risk premium.
New Zealand’s economic prospects bolster the Kiwi
Beyond the immediate impact of Trump’s comments, the New Zealand dollar has also benefited from improving sentiment around New Zealand’s economic recovery. After nearing a multi-year low of 0.5542 earlier this month, NZD/USD has regained strength amid growing confidence in the country’s ability to rebound from last year’s recessionary pressures. However, the Reserve Bank of New Zealand’s (RBNZ) anticipated rate cuts may limit the Kiwi’s upside potential in the weeks ahead.
In prior analysis, we highlighted the NZD/USD’s struggles below 0.5650 due to USD strength and global trade uncertainties. These factors, combined with evolving U.S.-China relations, continue to define the pair’s trajectory.
