NZD slips as reality of tariffs sink in
Written by
Daily Currency Update
The New Zealand dollar starts the week on the back foot, as markets react to the weekend's headline US-EU trade announcement. Equities and risk assets rallied on open, and the NZD edged toward a session high, just short of US$0.6025, before sentiment shifted, prompting a precipitous overnight sell-off. The initial lustre of the US-EU trade deal did not last long, and optimism surrounding the announcement faded as markets looked beyond the headline.While the agreement ensures baseline tariffs won’t exceed 15%, they will still damage growth across the continent, with GDP forecasters expecting a 0.5% dip in activity through the coming 12 months. The euro tumbled and the NZD followed suit after President Trump announced he planned to set the tariff rate at 15-20% for all remaining trading partners that had not yet struck a deal. Having fallen back through US$0.60, the NZD marked intraday lows below US$0.5970 while giving up ground to most other trading partners. Notably, the NZD is lower against the CAD, JPY and GBP and steady against the AUD.
With little of note on today’s macro ticket, our attention turns now to a raft of US macro items, headlined by trade data, JOLTS job numbers and consumer sentiment.
Key Movers
There is plenty to digest on Tuesday, as fallout from the weekend's headline trade announcement between the US and EU continues. Markets drove the euro and risk assets higher on reports that a deal had finally been struck. Risk aversion faltered on open as fears of a punitive 30% tariff would be levied were quieted. Confirmation of a deal that would see a reciprocal 15% tariff rate applied to most goods helped the euro climb to a high just north of 1.1770. The lustre did not last long, as focus shifted to the actual implications of an elevated tariff environment.Even at 15%, growth across Europe will slow, and while European leaders were relieved a deal had finally been reached, there was little fanfare. German Chancellor Merz said tariffs would cause “considerable damage” to the German economy, while Spain’s Prime Minister Pedro Sanchez said he supported the deal “without enthusiasm". The euro tumbled through overnight trade, down 1.3% to 1.1590, while other European currencies were dragged lower, and the USD DXY index rallied.
The Canadian dollar was one of the only majors to offer resistance to USD gains. An uptick in oil prices and the CAD’s ability to absorb larger USD moves helped it outperform on the day.
Our focus now turns to US trade, Jobs and consumer sentiment data.
Expected Ranges
- NZD/USD: 0.5920 - 0.6030 ▼
- NZD/EUR: 0.5080 - 0.5180 ▲
- GBP/NZD: 2.2200 - 2.2500 ▲
- NZD/AUD: 0.9100 - 0.9200 ▲
- NZD/CAD: 0.8150 - 0.8250 ▼