NZD/USD price weakens as Trump tariff threats and RBNZ dovish stance weigh on kiwi
NZD/USD weakens below 0.5700 amid tariff concerns and dovish RBNZ stance
The NZD/USD pair dipped to 0.5670 during early Asian trading on Tuesday, down 0.38% for the day. The U.S. dollar strengthened as markets reacted to U.S. President Donald Trump’s renewed tariff threats, while weak Chinese economic data and dovish expectations from the Reserve Bank of New Zealand (RBNZ) added further pressure on the New Zealand dollar.
Key levels to watch include 0.5650 as the next support and 0.5700 as immediate resistance. The Fed’s rate decision and Trump’s next economic policy moves will determine the pair’s direction in the coming weeks.
NZD/USD price dynamics (Dec 2024 - Jan 2025) Source: TradingView.
Trump’s tariff threats boost USD
Late Monday, Trump announced plans to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper. The move aims to bring manufacturing back to the U.S., reinforcing his “America First” policy. Trump’s Treasury Secretary, Scott Bessent, further suggested that new universal tariffs on imports could start at 2.5%, with potential increases to 20%. These announcements strengthened the greenback, weighing on risk-sensitive currencies like the NZD.
Adding to the market’s focus, investors await key U.S. data releases, including Durable Goods Orders, the Conference Board’s Consumer Confidence Index, and the Richmond Fed Manufacturing Index. The Federal Reserve’s interest rate decision, set for Wednesday, also remains a crucial market catalyst. While inflation has eased, analysts expect the Fed to pause further rate cuts after already reducing rates by 100 basis points since July 2024. Any dovish signals from Fed Chair Jerome Powell’s press conference could impact USD strength.
Weak Chinese PMI and RBNZ rate cut expectations
The latest Chinese Purchasing Managers’ Index (PMI) data disappointed markets, signaling weaker economic activity. Given China’s close trade ties with New Zealand, the downbeat data negatively affected the Kiwi. Additionally, market expectations for further rate cuts by the RBNZ have put downward pressure on NZD/USD. Swap markets indicate a 90% probability of another 50-basis-point rate cut on February 19, adding to previous cuts. Analysts predict a total of 100 basis points in rate reductions through 2025.
With Trump’s tariff policies driving USD strength and RBNZ’s dovish stance limiting upside for the Kiwi, the NZD/USD pair remains vulnerable.
Previously, we discussed how NZD/USD had surged to a five-week high near 0.5720 amid optimism over US-China trade talks. However, weak Chinese data and Trump’s tariff stance have now reversed this momentum, leading to a fresh downturn for the pair.
