NZD/USD holds below 0.5700 on Trump's tariff plans, dovish RBNZ bets

• NZD/USD softens to near 0.5675 in Friday's early Asian session. 
• The RBNZ is expected to cut its Official Cash Rate by 50 bps in the February meeting.
• Trump said he would demand that interest rates drop immediately.

The NZD/USD pair trades in negative territory around 0.5675 during the early Asian session on Friday. The New Zealand Dollar (NZD) struggles to gain ground amid the uncertainty surrounding tariff announcements on China by US President Donald Trump and the dovish stance of the Reserve Bank of New Zealand (RBNZ).

New Zealand's Consumer Price Index (CPI) inflation data for the fourth quarter of 2024 revealed that underlying inflation continues to soften, raising the bets that the RBNZ will deliver further rate cuts. Swaps markets are now pricing in nearly 90% possibility of another 50 basis points (bps) reduction on February 19, adding to the two delivered earlier in the cycle. The RBNZ is expected to deliver a total of 100 bps of rate cuts for the remainder of 2025.

On the other hand, the downside for the pair might be limited after Trump's remarks. Late Thursday, Trump said he wants the US Federal Reserve (Fed) to cut interest rates immediately. "With oil prices going down, I'll demand that interest rates drop immediately, and likewise they should be dropping all over the world," said Trump at the World Economic Forum in Davos, Switzerland.

Investors will closely monitor further clarity on Trump's tariff policies as well as the US economic data. The flash US S&P Global Manufacturing and Services Purchasing Managers Index (PMI) for January will take center stage later on Friday. Additionally, the US Existing Home Sales and Michigan Consumer Sentiment Index data will be published.