NZD/USD has increased to about 0.5835 during early Wednesday trading in Europe. This rise comes after Donald Trump announced new tariff threats against Europe, sparking “Sell America” sentiment among traders. Due to these tariff threats, the US Dollar has weakened compared to the New Zealand Dollar. Traders are also looking forward to Trump’s upcoming speech at the World Economic Forum.

Trump’s Tariff Announcements

Trump has introduced 10% tariffs on eight European countries over issues related to Greenland. He mentioned that these tariffs could rise to 25% if a deal is not reached by June 1. This situation raises concerns about ongoing uncertainty and strained relations between countries. The Consumer Price Index (CPI) report from New Zealand, expected on Friday, will also be closely watched. Several factors affect the value of the NZD, including China’s economic performance and dairy prices. The Reserve Bank of New Zealand’s interest rate decisions aim for inflation between 1% and 3%. Macroeconomic data, how investors feel, and risk perception all play a role in the NZD’s performance. The currency usually does well when the market is confident and struggles during uncertain times.

Challenges Facing The Dollar And Kiwi

This time last year, in January 2025, the “Sell America” narrative had a strong impact on trading due to tariff threats. This trend continued throughout the year, leading to a weaker dollar. Now, with NZD/USD trading at around 0.6120, the situation has grown more complex. The dollar’s future is now less clear than it was for much of 2025. Recent data indicated that US GDP growth for Q4 2025 slowed to just 1.5%. Meanwhile, the Consumer Price Index for December remained high at an annual rate of 3.2%. This economic backdrop limits the Federal Reserve’s options and adds uncertainty to the dollar’s direction. Conversely, the Kiwi faces its own difficulties, which may prompt caution from traders. New Zealand’s Q4 2025 inflation rate recently came in at 2.1% year-over-year, within the RBNZ’s target but raising concerns about potential interest rate cuts later this year. Additionally, reports show that industrial production is slowing in China, a key export market for New Zealand. The struggle between a slowing US economy and a possibly dovish RBNZ hints that NZD/USD might lack a clear direction. Traders should consider options strategies that benefit from spikes in volatility without focusing on a specific trend, like long straddles. This approach is particularly useful ahead of the impending employment data from both countries. We experienced a similar situation during the 2018-2019 period when trade policy discussions influenced the markets. During that time, the initial dollar weakness was often limited as concerns about global growth—a factor that negatively impacts the Kiwi—came to the forefront. This historical trend suggests that any additional strength in NZD/USD might be hard to maintain. Create your live VT Markets account and start trading now.

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