Impact of US Tariff Reductions

The recent easing of US monetary policy has overshadowed the US decision to cut tariffs on New Zealand’s exports. This move may put pressure on the NZD. To combat rising grocery prices, President Trump lifted tariffs on over 200 food items, including beef, which helps New Zealand’s exports. Hawkish comments from Fed officials like Kansas City Fed President Jeffery Schmid have unsettled traders, impacting the USD. Broader factors, such as China’s economic performance and dairy prices, also affect the NZD because of their importance in New Zealand’s trade. Currently, the NZD/USD is trading around 0.5655. The main influence here is the differing policies of the central banks. The Reserve Bank of New Zealand (RBNZ) plans to cut its Official Cash Rate again on November 26, following a cut last month. This aggressive approach is in sharp contrast to the stance of the US Federal Reserve. The RBNZ’s cautious position responds to weak domestic data, particularly the reported 0.9% contraction in GDP for the second quarter of 2025. Additionally, New Zealand’s latest inflation data for Q3 2025 showed a slower-than-expected cooling at 3.2%. This means the RBNZ must prioritize falling growth over persistent inflation. Historically, the RBNZ has cut rates even when inflation is above target if growth forecasts turn negative, as they have now.

External Influences on the Kiwi Dollar

On the other hand, the US economy seems stronger, supporting a stronger dollar. The September Nonfarm Payrolls report, released in early October 2025, showed an impressive increase of 215,000 jobs, exceeding expectations. This gives the Federal Reserve less reason to consider rate cuts, which only enhances the interest rate advantage of the US dollar over the kiwi dollar. The US decision to lift tariffs on New Zealand exports is a positive step, but it is overshadowed by monetary policy changes. Although this provides some support, its impact is limited compared to the strong influence of differing interest rate expectations. Looking back at 2018-2019, we see that central bank actions often drive currency pairs more than specific trade announcements. For traders, this situation suggests a strategy of positioning for further NZD/USD weakness, especially with the RBNZ meeting coming up next week. Buying put options on the NZD/USD could be a smart way to profit from a potential decline while minimizing risk. Selling NZD/USD futures contracts is a more direct method to express this bearish outlook. We also need to monitor external factors that impact the kiwi dollar. In early November 2025, the latest Global Dairy Trade auction saw prices drop by 1.8%, indicating weak demand for New Zealand’s main export. Additionally, China’s manufacturing PMI for October 2025 fell to 49.7, showing a contraction in the economy of New Zealand’s largest trading partner. Create your live VT Markets account and start trading now.

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