The New Zealand dollar weakened against the US dollar, with NZD/USD slipping below 0.5650, as Trump’s renewed tariff threats fueled market uncertainty. Risk-sensitive currencies like the kiwi came under pressure as investors moved toward safe-haven assets, boosting demand for the US dollar.
The market reaction followed Trump’s comments suggesting potential new tariffs, which raised concerns over global trade disruptions. The forex market quickly responded, with investors reducing exposure to high-beta currencies like the NZD, leading to a broad-based selloff. The uncertainty weighed on market sentiment, driving US Treasury yields higher, which further supported the dollar.
Despite recent signs of resilience in New Zealand’s economy, the Reserve Bank of New Zealand (RBNZ) has maintained a cautious stance, limiting the kiwi’s ability to stage a meaningful recovery. Traders remain wary of further downside risks, especially if global trade tensions escalate, impacting New Zealand’s export-driven economy.
Meanwhile, the US dollar stayed firm, benefiting from expectations that the Federal Reserve will maintain a restrictive policy stance for longer. Although some recent US data has pointed to a slowdown in economic activity, markets remain unconvinced that the Fed will pivot toward rate cuts anytime soon, keeping the dollar’s bullish momentum intact.
Looking ahead, investors will focus on US inflation data and any further developments regarding Trump’s trade policies, which could determine the pair’s next move. A stronger-than-expected US inflation print could reinforce the Fed’s hawkish stance, applying further pressure on NZD/USD, while any softening in trade rhetoric may offer some relief to the kiwi.
For now, NZD/USD remains vulnerable, with 0.5650 acting as a key resistance level. Unless sentiment shifts in favor of risk assets, the pair could see further downside in the sessions ahead.
