NZD/USD extends losses to near 0.5650 following new tariff plans from Trump

• NZD/USD receives downward pressure from risk-off mood amid fresh tariff threats from US President Donald Trump.
• Trump plans to impose tariffs on US imports of computer chips, pharmaceuticals, steel, aluminum, and copper.
• Traders expect the RBNZ to deliver a 50 basis point rate cut in February.

The NZD/USD pair continues its downward trend for the second day, trading around 0.5660 during early European hours on Tuesday. This decline is attributed to fresh tariff threats from US President Donald Trump.

On Monday evening, President Trump announced plans to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper, aiming to shift production to the United States and boost domestic manufacturing. Additionally, Trump's advisers consider imposing 25% tariffs on Mexico and Canada by February 1.

Meanwhile, the US Dollar Index (DXY), which measures the US Dollar (USD) against a basket of six major currencies, hovers near 108.00. Market participants are likely to monitor key US economic releases later in the day, including Durable Goods Orders, the Conference Board's Consumer Confidence Index, and the Richmond Fed Manufacturing Index.

The Kiwi Dollar struggles due to dovish expectations surrounding the Reserve Bank of New Zealand's (RBNZ) policy stance. Swaps markets are now pricing in nearly a 90% chance of another 50 bps reduction on February 19, adding to the two cuts already delivered earlier in the cycle. The central bank is expected to deliver a total of 100 bps of rate cuts for the remainder of 2025.

In a parliamentary speech on Tuesday, New Zealand Prime Minister Christopher Luxon emphasized his government's focus on growth to lift incomes, strengthen local businesses, and create opportunities in 2025. He noted promising signs of success in 2024, such as low inflation, falling interest rates, rising wages, and increased business and consumer confidence.