The New Zealand dollar has rebounded on Tuesday. NZD/USD is trading at 0.5615, up 1.3% on the day. This follows a 5% plunge over the past two days.
RBNZ widely expected to cut rates
The Reserve Bank of New Zealand is widely expected to lower interest rates by a quarter-point at its rate meeting on Wednesday. The markets have priced in a quarter-point cut at 75% and a jumbo half-point cut at 25%. The cash rate currently stands at 3.75%
The RBNZ slashed rates by a half-point in February, a response to weak economic growth and an inflation rate of around 2%, the midpoint of its target band.
The market meltdown and escalation in trade tensions due to new US tariffs could force the RBNZ to lower rates faster and deeper than previously expected. There is massive uncertainty in the air and the central bank will have to re-evaluate inflation and growth expectations, given the tariff turmoil.
There is growing talk of a global recession, which would badly hurt New Zealand’s export-reliant economy. China is New Zealand’s largest trade partner and the escalating trade tensions between the US and China could turn into a New Zealand nightmare. China has imposed 34% reciprocal tariffs on the US, drawing a threat from President Trump that he will counter with a 50% tariff if the Chinese tariff is not removed.
The RBNZ is dealing with the tariff crisis without Governor Adrian Orr, who suddenly resigned last month in the middle of his five-year term. The government has appointed Christian Hawkesby as Governor for a six-month term, after serving as the acting governor after Orr resigned.
NZD/USD Technical
- NZD/USD pushed above resistance at 0.5565 and tested resistance at 0.5623. The next resistance line is 0.5704
- 0.5484 and 0.5426 are providing support
