- NZD/USD edges higher to near 0.5980 in Wednesday’s Asian session.
- The US Treasury secretary said a trade war with China is not sustainable.
- The RBNZ dovish bets might cap the NZD’s upside.
The NZD/USD pair gathers strength to around 0.5980 during the Asian trading hours on Wednesday. The New Zealand Dollar (NZD) has risen to its highest level since early November 2024 against the US Dollar (USD) after the optimistic comments from the US Treasury Secretary Scott Bessent. Traders will take more cues from the flash US S&P Global Manufacturing and Services PMIs for April, which will be published later on Wednesday.
Bessent said on Tuesday that the ongoing tariffs showdown against China is unsustainable, and he expects a “de-escalation” in the trade war between the world’s two largest economies in the near future. The easing fears of US-China trade tensions fuel optimism in markets and provide some support to the China-proxy Kiwi as China is New Zealand’s largest trading partner.
US Treasury Secretary also cautioned that talks between the US and China had yet to formally start. Trump imposed the import tax of 145% on China, which has countered with 125% tariffs on US goods. The concerns over slower US economic growth and higher inflationary pressures could undermine the USD and create a tailwind for NZD/USD.
On the other hand, money markets have fully priced in a rate cut from the Reserve Bank of New Zealand (RBNZ) at the May meeting despite the surge in inflation. The RBNZ cut rates by a quarter-point earlier this month, lowering its Official Cash Rate (OCR) to 3.5%, the lowest level since October 2022. The New Zealand central bank is expected to remain aggressive and continue cutting rates in order to boost the New Zealand economy. This, in turn, might cap the upside for the NZD in the near term.
