NZD bounces off lows on prospect of measured tariff program
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Daily Currency Update
The New Zealand dollar edged higher through trade on Tuesday, bouncing off two-year lows following reports the Trump Whitehouse will adopt a measured approach to tariffs. Bloomberg reported that Trump’s economic team prefers gradually increasing tariffs on trading partners, rather than issuing a single one-off larger tax to control inflation. With US PPI data unexpectedly slowing the NZD was able to build on gains won through the domestic session, edging back toward US$0.5630 before settling nearer US$0.56 leading into this morning's open. Our attention now turns to US inflation data. With price pressures increasing over recent months, there is growing concern the correction in the post-pandemic inflation crisis is stalling and the introduction of tariffs will only exacerbate rising costs. A 0.3% increase will likely further temper Fed rate cut expectations and underpin the dollar's recent gains.Key Movers
The US dollar fell through trade on Tuesday after reports emerged that Trump’s economic team would pursue a measured and gradual introduction of tariffs for fear of fueling inflation. While PPI data printed unexpectedly softer CPI inflation has risen through the last 4 months raising concerns the post-pandemic disinflation process is faltering. US treasury yields edged lower forcing the USD lower against most trading partners. In contrast, European yields rallied with 10-year German Bunds approaching their 2024 highs allowing the euro to recover some of the losses seen following Friday’s stronger-than-expected US non-farm payroll print. The single currency bounced back above US$1.02 and US$1.03 and opened this morning just short of US$1.0310.Our attention today turns to US CPI data as the headline item on the macroeconomic agenda.
Expected Ranges
- NZD/USD: 0.5530 - 0.5650 ▲
- NZD/EUR: 0.5400 - 0.5500 ▼
- GBP/NZD: 2.1550 - 2.1850 ▼
- NZD/AUD: 0.9000 - 0.9100 ▲
- NZD/CAD: 0.8000 - 0.8100 ▲