Fears about the global trade outlook have crushed risk appetite on Monday and are weighing on the NZD.
Trump is sending letters today, informing trading partners of the tariffs applied to their products.
The RBNZ is expected to deliver a "dovish hold" this week, which might add pressure to the Kiwi.
Risk aversion is driving markets on Monday as Trump prepares letters informing trade partners of the tariffs on their products. The sentiment and trade-sensitive New Zealand Dollar has accelerated its reversal from last week’s high, at 0.6120, and is testing the 0.6000 psychological level at the time of writing.
Comments by the US Administration announced that countries that did not cut deals with the US will be back to the levies announced in April, but it is unclear whether the deadline is the original July 9 or August 1, as the US Treasury Secretary, Scott Bessent announced earlier today.
Tariffs and trade uncertainty are hitting the risk-sensitive Kiwi
Investors, however, have reacted with risk aversion, rushing into safe assets to the detriment of riskier perceived currencies like the Kiwi. Higher levies on exports to the US and a significant disruption in global trade, as US tariffs might be responded to with similar ones by the targeted countries, are likely to weigh on a trade-oriented economy like New Zealand’s.
dovishly tilted
The economic calendar in the US and New Zealand is light today, but the market is bracing for the RBNZ’s monetary policy decision later this week. The bank is expected to leave interest rates on hold but also to convey a dovishly tilted message, pointing to the downside risks to the economy stemming from the uncertain trade scenario.
The US Dollar, on the other hand, remains weighed by a mix of tariff uncertainty and growing concerns about the sustainability of its Government debt, following the approval of Trump’s “Big, Beautiful Tax Bill”. These fears have offset the bright employment figures seen last week and are keeping the pair from dropping further in the current adverse scenario.
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