FX.co ★ New Zealand Dollar Holds Gains

The New Zealand dollar maintained its recent upward trend, trading at approximately $0.595 on Wednesday. This strength was largely due to a weakened US dollar, following muted US consumer inflation figures, which increased the likelihood of the Federal Reserve implementing a rate cut in September. Domestically, however, the New Zealand dollar faces downward pressure. Markets are increasingly anticipating that the Reserve Bank of New Zealand will lower its official cash rate by 25 basis points next week. This expectation is driven by both weaker-than-forecast inflation data and a lackluster labor market report. Additionally, sentiment is dampened by apprehensions about the effects of US tariffs on New Zealand’s export-dependent economy. Earlier in the week, Prime Minister Christopher Luxon acknowledged that the government is unlikely to secure a reduction in the US's 15% tariff on New Zealand goods. This tariff rate is notably higher than that imposed on some of New Zealand’s trade competitors, such as Australia and the UK, which stand at 10%.