NZD edges higher in face of US tariff news
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Daily Currency Update
The New Zealand dollar tracked within a narrow range on Thursday, as markets digest President Trump’s latest tariff announcement. Softer than expected US PPI data and a risk on shift, buoyed by hopes an end to the war between Russia and the Ukraine may be brokered, helped drive the NZD toward upper end of recent ranges. Having been stuck between US$0.5620 and US$0.5660, the NZD extended through resistance touching US$0.5677 after President Trump set out the US’s reciprocal tariff plan. The wide-reaching nature of the announcement helped proffer a short term USD bounce, pushing the NZD back toward US$0.5650, before regaining its upward momentum. While the NZD remains vulnerable to a US led trade war that stifles global growth, markets are now beginning to short the USD as the impacts of a tariff program are likely to weigh on US domestic economic performance. Of course, this could well change when we obtain more detail as to what the new administrations tariff programs actually involve, but markets are taking comfort in the fact the latest set will not take effect until April.Our attentions today turn to domestic manufacturing PMI’s, US retail sales and European Q4 GDP data along with any fallout from Trump's tariff announcements.
Key Movers
There is plenty to digest today with the USD index giving up 0.6%, despite wide reaching tariff announcements. European currencies led gains against the USD, as markets bask in the afterglow of reports the Ukraine and Russia will begin negotiations to end the war. The CHF, SEK and euro all led gains, with the latter shrugging of a promise from president Trump to issue a reciprocal tariff on European VAT. While markets had expected the US announcing wide-reaching tariffs in retaliation to European levies, no one expected Trump to suggest the new administration would look to issue a Tariff to combat Value added Tax. While in effect VAT is a border tax, it is applied to all goods much like Australia’s GST and hardly singles out US exports. While the euro baulked at the announcement, it recovered its upward momentum to trade above 1.0450.With the USD on the back foot, the JPY enjoyed a 1% rally, while the GBP jumped back through 1.25 and 1.2550.
Our attentions turn now to European Q4 GDP data and US retail sales along with any fall out from Trumps proposed tariff agenda.
Expected Ranges
- NZD/USD: 0.5620 - 0.5700 ▲
- NZD/EUR: 0.5380 - 0.5450 ▼
- GBP/NZD: 2.1900 - 2.2200 ▲
- NZD/AUD: 0.8920 - 0.9020 ▼
- NZD/CAD: 0.8000 - 0.8100 ▼