The New Zealand Dollar (NZD) is facing downward pressure due to US President Donald Trump's threat to impose tariffs on Chinese goods. Investors are closely watching the situation as China is a major trading partner for New Zealand. Despite a slight increase in inflation, the RBNZ is expected to cut interest rates further.
The NZD/USD currency pair softened to around 0.5660 during Wednesday's early Asian session, marking a 0.18% decline for the day. This downturn can be attributed to US President Donald Trump 's recent threats regarding tariffs on Chinese imports. Trump announced on Tuesday that his administration is contemplating a 10% tariff on goods originating from China , slated to take effect on February 1.
This proposed tariff is in response to the influx of fentanyl from China to Mexico and Canada, according to Reuters.Investors are closely monitoring the unfolding situation regarding US tariff policies as China constitutes a significant trading partner for New Zealand. Any escalation in trade tensions between the US and China is likely to negatively impact the New Zealand Dollar, which is often viewed as a proxy for the Chinese economy.Despite a slight overshoot in New Zealand's Consumer Price Index (CPI) inflation for December, exceeding expectations, the magnitude of the increase does not appear substantial enough to deter anticipations of another substantial rate cut from the Reserve Bank of New Zealand (RBNZ) in February. Swaps markets are currently projecting a 90% probability of a 50 basis points (bps) reduction on February 19, adding to the two cuts already implemented earlier in the cycle. The RBNZ is anticipated to deliver a total of 100 bps of rate cuts for the remainder of 2025. The RBNZ's dovish stance continues to exert downward pressure on the Kiwi against the US Dollar
NZD/USD New Zealand Dollar US Dollar Trump Tariffs China RBNZ Interest Rates Inflation
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