The NZD/USD currency pair has begun the Asian trading session on Friday at approximately 0.6020, displaying a slight downward trend. Following the Federal Reserve’s decision to reduce interest rates by 25 basis points on Thursday, this outcome had largely been anticipated by the market. However, the potential impact of Donald Trump’s proposals to increase tariffs could put additional pressure on the New Zealand dollar against the U.S. dollar.
Concerns surrounding Trump’s plans to adjust trade relations with China may restrict any upward movement for the Kiwi in the short term. As traders look ahead, the release of the advanced US Michigan Consumer Sentiment report is eagerly awaited later in the day, along with a speech from a Federal Reserve official that could provide more insight into future monetary policy decisions.
The recent interest rate cut by the Federal Reserve has lowered the target range to between 4.50% and 4.75%. Analysts are interpreting the Fed’s indications as a sign of potential further reductions in the future, although the exact timing remains uncertain. Currently, market expectations suggest there is nearly a 75% chance that another rate cut will take place in December, reflecting a slight increase from earlier this week.
For New Zealand, the ramifications of possible trade tariffs loom large. If Trump were to implement a blanket 60% tariff on all Chinese imports, it would negatively affect the value of the New Zealand dollar, considering China is a vital trade partner for New Zealand. Additionally, market speculation is growing regarding a likely rate-cut cycle by the Reserve Bank of New Zealand. The Reserve Bank is anticipated to cut the official cash rate by 50 basis points in its upcoming meeting, with a more substantial reduction of 75 basis points being a remote possibility. This environment adds to the prevailing bearish sentiment surrounding the Kiwi dollar.
