The NZD/USD currency pair is currently facing downward pressure, trading around the 0.5645 level and down 0.53% for the day. The decline is largely attributed to statements made by former US President Donald Trump regarding potential tariff increases on Canada and Mexico, with suggested rates reaching as high as 25%. These remarks have reignited concerns about trade relations and their implications for the market.
The US Dollar is experiencing a rebound in the wake of Trump’s announcement, which indicates tariffs may be implemented as soon as early February. His remarks emphasize a desire to impose significant tariffs, raising market anxiety and affecting currency valuations. As a result, the US Dollar Index, which measures the dollar’s strength against a basket of major currencies, has recovered from a two-week low and is currently trading above 108.50, reflecting an increase of approximately 0.40% on the day.
Investors remain keen on developments regarding trade policies, particularly in light of past threats to impose substantial tariffs on China, which could negatively impact the New Zealand Dollar due to its heavy reliance on trade with China. Any escalation in tariffs could further complicate New Zealand’s export dynamics and weigh on the currency’s performance.
Compounding the NZD’s challenges, recent economic data from New Zealand has revealed a decline in the Performance of Services Index (PSI), which fell to 47.9 in December from 49.5 the prior month. This marks ten consecutive months of contraction in the service sector, signaling underlying economic weakness. Such data only adds to the bearish sentiment surrounding the New Zealand Dollar, making the currency more vulnerable to external pressures.
