Risk sentiment evaporates as US reveals its tariff plans
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Daily Currency Update
Let the volatility begin. The NZD edged higher through trade on Wednesday, creeping back above US$0.57 and US$0.5750 as markets prepared positions ahead of the US reciprocal tariff review. Reports that a blanket 10% tariff would be applied sparked hopes the Trump administration would be far more lenient than first feared, bolstering risk appetite and helping the NZD mark session highs above US$0.5765. The upswing was however short-lived as it emerged the 10% blanket tariff was simply a starting point and the minimum tax applied. Higher reciprocal tariffs will be issued and take effect from April 9, with additional higher tariff rates to then be applied against what the US deems the worst offenders when assessing barriers to trade. While it's early days, it is evident the Trump Administration will not back away from its tariff agenda, and early signs suggest a trade war is imminent. Having pitched back below US$0.5720 the NZD is vulnerable to further risk off selling. We are closely monitoring market reactions and emerging headlines in shaping expectations for direction.Key Movers
Price action through the early hours of Thursday morning has been driven by evolving headlines and updates from the Trump Administration about its reciprocal tariff agenda. Risk appetite enjoyed a boost leading into the President's Rose Garden address as reports suggested the US planned to implement a basic 10% blanket tariff. Such a program would be far more lenient than markets first feared, and investors looked to capitalise, propelling risk equities and risk correlated currencies higher. The upswing was however short-lived as it quickly emerged the 10% tariff was simply a starting point with higher, more punishing tariffs to follow. A 20% tariff will be imposed on European exports to the US, while a further 34% tariff will be applied on goods imported from China. In response, the euro has slipped off highs above 1.0920 and now trades below 1.0850. On the flip side, the Canadian dollar has enjoyed strong gains as Canada and Mexico have been afforded exemptions to additional tariffs as long as goods continue to be compliant with the USMCA trade agreement. The CAD bounced off lows just above US$0.6970 and now trades above US$0.7030.While it is still early days, it is evident the Trump administration is not afraid of a trade war, the impacts of which would flatten global growth expectations. We are keenly attuned to headlines as they emerge and of course the response from key European and Chinese officials. We can expect plenty of volatility in the hours and days to come.
Expected Ranges
- NZD/USD: 0.5650 - 0.5750 ▼
- NZD/EUR: 0.5250 - 0.5320 ▼
- GBP/NZD: 2.2500 - 2.2800 ▲
- NZD/AUD: 0.9080 - 0.9150 ▲
- NZD/CAD: 0.8080 - 0.8230 ▼