With US Tariff Relief Looking Unlikely
With US tariff relief looking unlikely, the New Zealand dollar faces a persistent headwind. This 15% tariff acts as a direct tax on a key part of our export economy, capping the potential upside for the NZD/USD pair. Traders should view any rallies with skepticism for the near future.
This sentiment is backed by the latest economic figures. New data from Stats NZ for the second quarter of 2025 showed a 0.8% contraction in export volumes to the United States, directly linked to these trade barriers. Furthermore, the Reserve Bank of New Zealand highlighted “global trade friction” as a primary risk to its growth forecast in its statement last week.
US Dollar Remains Firm
On the other side of the pair, the US dollar remains firm. The US Federal Reserve, in its July 2025 meeting, signaled a continued “higher for longer” stance on interest rates, as core PCE inflation remains stubbornly above target at 2.8%. This interest rate differential between the US and New Zealand will likely continue to favor the dollar.
We saw a similar dynamic play out during the 2018-2019 period. Escalating US-China trade tensions consistently weighed on the Kiwi dollar, pushing NZD/USD lower even when our domestic fundamentals were otherwise solid. History suggests that in an environment of trade protectionism, commodity currencies like the NZD tend to underperform.
Given this outlook, traders could consider strategies that profit from limited upside or a decline in the NZD/USD. Buying put options on the New Zealand dollar would provide downside exposure with limited risk. Selling out-of-the-money call options is another strategy to collect premium by betting that the pair will not break through key resistance levels in the coming weeks.
The 0.6250 level, which was tested and rejected in late July 2025, now appears to be an even more formidable ceiling for the currency pair. Any approach towards this level may present an opportunity to initiate bearish positions. We should anticipate the NZD/USD to trade in a range, with pressure skewed towards the downside as long as these tariffs remain in place.
