NZD/USD gave up about half of its early rise in Monday’s early European session after selling interest above 0.6000. It still traded 0.13% higher at about 0.5980.
The US Dollar stayed weak on renewed uncertainty about US trade policy. The US Dollar Index (DXY) fell 0.35% to about 97.45.
Supreme Court Tariff Ruling Fallout
The US Supreme Court struck down President Donald Trump’s tariff policy as unlawful. Trump then announced 15% global tariffs in response.
The US Dollar also faced pressure from weak Q4 GDP and slower-than-expected S&P Global PMI growth for February. Markets are also watching speeches from Federal Reserve officials this week.
Traders expect the Fed to keep rates unchanged at the March and April meetings, based on the CME FedWatch tool. In New Zealand, Q4 Retail Sales rose 0.9% versus 0.6% forecasts, but below the prior 1.9%.
The New Zealand Dollar may react to the People’s Bank of China’s monetary policy decision on Tuesday.
Dollar Weakness And Market Volatility
We recall how the US Dollar weakened a year ago in February 2025 after the Supreme Court’s ruling on tariffs. The subsequent announcement of a 15% global tariff created significant uncertainty, pushing the Dollar Index down to the 97.45 level. This instability set the stage for a volatile year in foreign exchange markets.
The trade friction that followed had a real impact, with major partners like the European Union and China implementing retaliatory measures by mid-2025. This led to a tangible slowdown, and World Trade Organization data eventually showed that global merchandise trade volume contracted by 1.2% in the final quarter of 2025. We saw this slowdown reflected in consistently weak US manufacturing PMI figures throughout the second half of the year.
This economic pressure prompted the Federal Reserve to change its stance, and we saw them deliver two 25-basis-point rate cuts in the fall of 2025 to support the economy. As a result, the US Dollar Index has continued its decline and is currently trading near 95.50. This sustained weakness has been a dominant theme for currency traders.
For the NZD/USD pair, this environment has been supportive, lifting it from the 0.5980 level seen a year ago to its current range around 0.6350. New Zealand’s relatively stable economic footing and trade links with Asia provided a buffer against some of the global slowdown. The Reserve Bank of New Zealand, in contrast to the Fed, has only cut rates once in the last 12 months, increasing the pair’s yield differential.
In the coming weeks, the path of least resistance for the US Dollar appears to be downwards amid these ongoing trade policy disputes. Derivative traders should consider strategies that benefit from further NZD/USD strength, such as buying call options to capture upside with limited risk. Given that currency volatility indices rose over 30% in the months following last year’s tariff news, using options to define risk remains a prudent approach.
