The NZD/USD pair weakened below 0.5650 on Wednesday as traders remained cautious ahead of potential tariff announcements from former U.S. President Donald Trump. Market participants are awaiting clarity on whether he will reinstate or expand trade restrictions on China, a move that could impact global risk sentiment and demand for commodity-linked currencies like the New Zealand dollar.
Uncertainty surrounding U.S.-China trade policy has weighed on risk assets, with investors treading carefully amid speculation of higher tariffs on Chinese goods. The greenback has strengthened as a result, benefiting from a flight to safety while keeping the New Zealand dollar under pressure. The currency pair’s decline reflects broader market jitters, as traders assess potential disruptions to trade flows and economic growth.
Adding to the bearish sentiment, New Zealand’s economic outlook remains fragile, with concerns over slowing growth and weak domestic demand. The Reserve Bank of New Zealand’s cautious stance on monetary policy has done little to support the currency, especially as the U.S. Federal Reserve maintains a higher-for-longer interest rate approach. This policy divergence continues to favor the U.S. dollar, limiting any significant recovery in NZD/USD.
Meanwhile, China’s role in the global economy remains a key factor influencing the New Zealand dollar. Any escalation in U.S. tariffs could dampen Chinese demand, indirectly affecting New Zealand’s export-driven economy. The prospect of trade tensions resurfacing is keeping traders on edge, reinforcing the bearish sentiment in NZD/USD.
Technical analysts note that a sustained break below 0.5650 could open the door for further downside, with the next key support level near 0.5600. Short-term momentum indicators signal continued selling pressure, although any surprises from U.S. trade policy could trigger volatility in the pair.
Until there is greater clarity on U.S.-China trade developments, NZD/USD is likely to remain under pressure. The market’s focus remains on potential policy shifts and how they may impact risk appetite, trade flows, and global currency dynamics.
