NZD/USD traded around 0.5990 during Asian hours on Monday. It extended gains for a third straight session and stayed close to 0.6000. The move was supported by New Zealand’s Q4 2025 retail sales figures. Retail Sales rose 0.9% quarter-on-quarter. This beat the 0.6% forecast and followed a 1.9% increase in the prior quarter. Retail Sales excluding Autos climbed 1.5%, up from 1.2% previously.

RBNZ Policy Outlook

Last week, the Reserve Bank of New Zealand kept the cash rate at 2.25%. It said policy will remain accommodative. The Bank also expects inflation to return to the midpoint of its target range over the next year. The pair also strengthened as the US Dollar softened on tariff uncertainty. This followed comments after a US Supreme Court decision that blocked the use of emergency powers for reciprocal tariffs. CNBC reported that President Donald Trump said on Saturday he plans to lift global tariffs to 15% from 10%. He said the tariffs would be “effective immediately” and warned that additional levies could follow. The RBNZ targets inflation between 1% and 3% over the medium term, with a focus near 2%. NZD moves can also track Chinese economic conditions and dairy export prices.

Balancing Domestic Strength And External Risks

Strong New Zealand retail sales in Q4 2025 have helped NZD/USD test the 0.6000 level. However, the RBNZ’s message last week—that policy will stay accommodative—is limiting further upside for now. As a result, solid local data is being balanced by a cautious central bank. External factors also matter, especially China’s growth outlook. In late 2025, China’s Manufacturing PMI stayed only slightly above 50.0, the level that signals expansion. This suggests growth is steady, but not speeding up. That may limit support from New Zealand’s largest trading partner. A more supportive factor has been dairy prices, which are important for New Zealand’s export income. The first Global Dairy Trade auctions of 2026 showed average prices rising by more than 3%, adding to gains from late last year. This has helped the NZD hold firm. The biggest uncertainty in the weeks ahead is US tariff policy. A sudden move to 15% tariffs could raise volatility sharply. Similar uncertainty drove fast, hard-to-predict swings during the 2018–2019 trade disputes. In this backdrop, options may be safer than a simple directional trade. Strategies like long straddles or strangles can benefit from a large move in either direction, without needing to predict how the tariff situation ends. Implied volatility for NZD/USD options still looks relatively low, which may make these strategies cheaper. For traders with a clear directional view, option spreads can help cap risk. If you think tariff fears will fade, a bull call spread could target a move toward 0.6100. If you expect tensions to rise and trigger a flight to safety, a bear put spread offers a controlled way to position for a decline. Create your live VT Markets account and start trading now.

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