NZD/USD weakens below 0.5700 on Trump tariff uncertainty

• NZD/USD softens to around 0.5690 in Monday's Asian session. 
• The uncertainty surrounding Trump's tariff policies weighs on the New Zealand Dollar. 
• The dovish expectation of the RBNZ might drag the NZD lower against the USD. 

The NZD/USD pair remains under selling pressure near 0.5690 during the Asian trading hours on Monday. The New Zealand Dollar (NZD) weakens amid the cautious mood and uncertainty over US President Donald Trump's tariff measures. Traders await the US Federal Reserve (Fed) interest rate decision scheduled for Wednesday. 

The Greenback has edged higher after Trump announced on Sunday to impose a 25% tariff on all Colombian goods coming into the US, which will be raised to 50% in a week. Investors will closely monitor the development surrounding Trump's tariff policies on China, as China is a major trading partner to New Zealand. Last week, Trump signaled that the nation could reach a deal with China without using tariffs.

The Fed is expected to keep interest rates on hold at its January meeting on Wednesday, but market players will keep an eye on the US rate path this year, especially after Trump demanded the Fed continue lowering borrowing costs. With so much uncertainty, "we expect (the Fed) to retain maximal optionality" to resume cuts in March or continue a pause, said Bank of America analyst Mark Cabana

On the other hand, the softer New Zealand's Consumer Price Index (CPI) inflation data for the fourth quarter of 2024 raised the bets that the Reserve Bank of New Zealand (RBNZ) will deliver further rate cuts, which might weigh on the Kiwi. Swaps markets are now pricing in nearly 90% odds of another 50 basis points (bps) reduction on February 19, adding to the two delivered earlier in the cycle. The New Zealand central bank is anticipated to deliver a total of 100 bps of rate cuts for the remainder of 2025.