NZD under pressure as trade tensions near boiling point
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Daily Currency Update
The New Zealand dollar fell on Thursday as risk appetite evaporated. The promise of more US tariffs, a possible US government shutdown and growing skepticism surrounding a Ukraine/Russia peace deal cast a pall over markets, forcing investors away from equities and risk assets and toward safe haven strongholds. The NZD slid back below US$0.57, marking intraday lows at US$0.5684 before finding support. Trade tensions escalated as President Trump threatened to impose a 200% tariff on wine, champagne, and other alcoholic beverages exported to the US from France and the EU if the EU did not immediately remove its proposed retaliatory tariffs on a range of goods primarily produced in Republican states. As the threat of a global trade war continues to escalate, risk sentiment faltered, falling further after Russian President Vladimir Putin rejected the US proposal for a ceasefire ahead of talks suggesting you can’t have a truce without first agreeing terms.The NZD opens this morning near US$0.57. Our attentions today turn to domestic PMI numbers, while fuel and food prices provide a key insight into future inflation pressures. Offshore trade will again be dominated by US trade policy, while Senate Democrats and Republicans work to push through a stop-gap funding bill to avoid a government shutdown, as risk sentiment remains key in shaping direction into the weekly close.
Key Movers
The US dollar outperformed on Thursday, stronger than all major counterparts, outside the yen, as risk sentiment faltered and investors chased haven assets. With peace talks between Russia and the Ukraine facing roadblocks, trade tensions escalating and the threat of a US government shutdown on the weekend increasing, markets moved away from equities and risk assets. President Trump escalated trade tensions with Europe, the target of his ire. After the EU announced plans to impose $28billion in tariffs on US goods, like whiskey, Harley Davidson motorcycles, and a range of other products produced in southern Republican states, President Trump threatened to impose a 200% tariff on wine and champagne exported from France, commenting “we will not back down, we’re not going to be ripped off anymore”. The euro slid back below 1.0850, while the pound gave up 1.2950.Our attentions turn now to UK Industrial Production and GDP data, while the EU release CPI numbers for February. Trade tensions and talks between senate Democrats and Republican to avoid a shutdown will prove key in shaping direction.
Expected Ranges
- NZD/USD: 0.5650 - 0.5750 ▼
- NZD/EUR: 0.5200 - 0.5300 ▼
- GBP/NZD: 2.2500 - 2.2900 ▲
- NZD/AUD: 0.9020 - 0.9120 ▲
- NZD/CAD: 0.8180 - 0.8280 ▼