Insights 
VT 
Impact Of Us Tariff Reductions
This monetary easing overshadowed the US decision to reduce tariffs on New Zealand exports, potentially putting pressure on the NZD. In response to rising US grocery prices, President Trump lifted tariffs on over 200 food items, including beef, benefitting New Zealand exports.
Hawkish comments from Fed officials, such as Kansas City Fed President Jeffery Schmid, have unsettled traders, potentially affecting the USD. Broader macroeconomic factors such as China’s economic performance and dairy prices also influence the NZD, given their role in New Zealand’s trade dynamics.
Given the NZD/USD is trading near 0.5655, we see the primary driver as the clear policy difference between the central banks. The Reserve Bank of New Zealand (RBNZ) is poised to cut its Official Cash Rate again on November 26, following the cut last month. This aggressive easing stands in stark contrast to the US Federal Reserve’s position.
The RBNZ’s dovish stance is a direct response to weak domestic data, particularly the 0.9% GDP contraction we saw reported for the second quarter of 2025. Adding to this, New Zealand’s latest inflation data for Q3 2025, which came in at 3.2%, showed a slower-than-expected cooling, forcing the RBNZ to prioritize collapsing growth over persistent inflation. Historically, we have seen the RBNZ cut rates even with inflation above target when growth forecasts turn sharply negative, as they have now.
External Influences On The Kiwi Dollar
Meanwhile, the US economy appears more resilient, reinforcing the case for a stronger dollar. The September Nonfarm Payrolls report, which was released in early October 2025, showed a solid addition of 215,000 jobs, beating expectations. This gives the Federal Reserve little reason to consider rate cuts, widening the interest rate advantage the US dollar holds over the kiwi dollar.
The recent US decision to lift tariffs on New Zealand exports is positive but is being overshadowed by monetary policy. While this provides some support, we view its impact as limited compared to the powerful influence of diverging interest rate expectations. Looking back at the 2018-2019 period, central bank actions consistently proved to be a more dominant long-term driver for currency pairs than specific trade announcements.
For traders, this outlook suggests positioning for further NZD/USD weakness, especially heading into the RBNZ meeting next week. We believe buying put options on the NZD/USD could be a prudent strategy to capitalize on a potential drop while limiting upside risk. Selling NZD/USD futures contracts is a more direct way to express this bearish view.
We must also watch external factors that influence the kiwi dollar. The latest Global Dairy Trade auction in early November 2025 saw prices fall by 1.8%, signaling weak demand for New Zealand’s main export. Furthermore, China’s recent manufacturing PMI for October 2025 dipped to 49.7, indicating a contraction in the economy of New Zealand’s largest trading partner.
