• NZD/USD weakens to near 0.5565 in Monday’s early European session. 
• China retaliated against Trump in a trade war with 34% tariffs on US imports, weighing on the China-proxy Kiwi. 
• The RBNZ is expected to cut its OCR by 25 bps to 3.50% on Wednesday. 

The NZD/USD pair remains under selling pressure around 0.5565 during the early European session on Monday. The New Zealand Dollar (NZD) softens against the Greenback as China slapped a 34% tax on all US imports in retaliation for US President Donald Trump’s tariffs, widening trade tensions between the United States and China. 

The Trump administration last week stated that the US will impose a 10% baseline tariff on all imports to the United States (US). China was hit hard, facing a tariff of at least 54% on many goods. Over the weekend, China announced retaliatory tariffs of 34% on US imports, signaling a major escalation of a trade war between the world’s two biggest economies. This, in turn, might drag the China-proxy Kiwi lower, as China is the major trading partner to New Zealand. 

“We are bearish on the New Zealand dollar because we consider markets have not priced enough negative impacts on the global economy from the trade war,” said Carol Kong, Sydney-based currency strategist at Commonwealth Bank of Australia.

The Reserve Bank of New Zealand (RBNZ) is expected to cut its Official Cash Rate (OCR) by 25 basis points (bps) to 3.50% at its April meeting on Wednesday, and analysts anticipate the  New Zealand central bank could make more rate cuts in 2025 as it reacts to US tariffs and their potential global economic fallout. After three straight 50 bps move, an expected quarter-point reduction may end up having little impact on the NZD since swap markets are already fully pricing in that outcome.

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