The NZD/USD pair is retracing its recent gains from the previous session, trading around 0.5960 during the Asian session on Tuesday. The US Dollar (USD) finds support amid growing optimism over easing US-China trade tensions. US President Donald Trump signaled a willingness to roll back tariffs on China, while Beijing granted exemptions on certain US imports, fueling hopes of a potential resolution to the protracted trade conflict between the two largest economies.
Trump highlighted progress in trade discussions and confirmed ongoing communication with Chinese President Xi Jinping. According to The Wall Street Journal, Trump is working to mitigate the impact of automotive tariffs by preventing overlapping duties on foreign vehicles and lowering levies on imported car parts.
However, the New Zealand Dollar (NZD) is under pressure due to conflicting signals from China. Despite Trump’s optimistic comments, a spokesperson for the Chinese embassy denied that trade negotiations were taking place, stating that “China and the US are not having any consultation or negotiation on tariffs” and urging Washington to avoid further confusion. This stance was reinforced by US Treasury Secretary Bessent, who emphasized that China must take steps toward de-escalation, contradicting Trump’s earlier suggestion that the US would ease tariffs first.
Domestically, the NZD is weighed down by weak labor market data, which has reinforced expectations that the Reserve Bank of New Zealand (RBNZ) will cut interest rates by 25 basis points in the coming month, with markets pricing in a 90% probability. Additionally, Finance Minister Nicola Willis announced that baseline spending in the 2025 budget would be reduced due to worsening economic conditions.
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