The New Zealand Dollar (NZD) remains under significant selling pressure, trading around 0.5565 against the US Dollar (USD) during the early European session on Monday. This decline follows recent developments in global trade relations, with the NZD weakening as China imposed retaliatory tariffs on US imports.
China’s decision to slap a 34% tax on all US imports is a direct response to the tariffs introduced by the Trump administration. Last week, the US government announced a 10% baseline tariff on all imports, with Chinese goods facing a tariff increase of at least 54%. In retaliation, China imposed its own 34% tariff on US imports, escalating the ongoing trade war between the two largest economies in the world. Given China’s status as a key trading partner for New Zealand, the escalation of trade tensions is expected to weigh heavily on the NZD, often considered a “China-proxy” currency.
Carol Kong, a currency strategist at the Commonwealth Bank of Australia in Sydney, expressed concerns about the potential long-term impact on the NZD. “We are bearish on the New Zealand dollar because we believe the markets have not fully priced in the negative economic impacts of the trade war,” Kong noted.
Further pressure on the NZD is anticipated from domestic economic policies. The Reserve Bank of New Zealand (RBNZ) is expected to announce a 25 basis point cut to its Official Cash Rate (OCR), reducing it to 3.50% at its upcoming meeting on Wednesday. Analysts suggest that this rate reduction, along with potential future cuts, could be a reaction to the global economic fallout from US tariffs. Despite this expected move, market participants believe that the impact on the NZD may be muted, as the rate cut has already been largely priced into the market following previous sharp moves by the RBNZ.
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