The New Zealand Dollar (NZD) remains under selling pressure against the U.S. Dollar (USD), with NZD/USD hovering around 0.5635 during the Asian session on Tuesday. Market sentiment remains fragile as concerns over potential trade wars under former U.S. President Donald Trump’s administration weigh on risk-sensitive assets. Investors now turn their focus to Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony later in the day.
Trump’s Tariff Plans Fuel Market Jitters
On Sunday, Trump announced his intention to impose a 25% tariff on all steel and aluminum imports into the U.S., a move set to impact major trading partners, including Canada, Mexico, and New Zealand. The prospect of escalating trade tensions adds to the downward pressure on the Kiwi.
New Zealand Finance Minister Nicola Willis emphasized the country’s balanced and complementary trade relationship with the U.S. and expressed hope for maintaining strong ties despite potential economic headwinds. However, any signs of further trade restrictions could accelerate NZD losses.
RBNZ Rate Cut Bets Weigh on the Kiwi
Beyond trade concerns, expectations of aggressive monetary easing by the Reserve Bank of New Zealand (RBNZ) contribute to NZD’s weakness. Markets have priced in a nearly 92% probability that the RBNZ will deliver a 50 basis point (bps) rate cut on February 19—its third consecutive supersized reduction.
As global markets digest trade policy developments and central bank actions, the NZD/USD pair remains vulnerable, with risks skewed to the downside. Investors will closely monitor Powell’s testimony and any fresh signals on U.S. trade policy for further directional cues.
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