The NZD/USD exchange rate has dipped to approximately 0.5670 during the early trading session on Tuesday, marking a decline of 0.38% for the day. Weighing on the New Zealand dollar are US President Donald Trump’s recent tariff announcements, alongside disappointing Chinese PMI figures and expectations of dovish monetary policy from the Reserve Bank of New Zealand (RBNZ).
As the US dollar gains strength amid the escalating trade tensions, the NZD/USD pair has shown a notable decline. Trump recently declared intentions to impose tariffs on a range of imports including computer chips, pharmaceuticals, steel, aluminum, and copper, with the aim of bolstering domestic production in the United States. This announcement has created a challenging environment for the Kiwi, especially as traders anticipate the potential economic fallout from such measures. Moreover, Trump’s Treasury secretary has indicated plans for universal tariffs on imports that could start at 2.5% and rise as high as 20%.
Attention is now focused on the upcoming US Federal Reserve interest rate decision, which is expected to be announced on Wednesday. Analysts anticipate that the central bank will pause further rate cuts after a total reduction of 100 basis points since July 2024. The subsequent press conference will be closely monitored for insights into the Fed’s future monetary policy trajectory amid concerns surrounding inflation.
Meanwhile, the RBNZ faces mounting pressure as recent Chinese economic data has underperformed expectations. Market participants are pricing in an almost 90% probability of an additional 50 basis point rate cut at the next meeting on February 19, potentially extending the cumulative rate reductions to 100 basis points for 2025. This dovish outlook further weighs on the New Zealand dollar, creating a challenging landscape for its investors.
