- In early Asian sessions on Tuesday, the edge of NZD/USD will be down to nearly 0.5600.
- China is preparing measures against fresh US import duties that will take effect on Tuesday.
- US ISM manufacturing PMI fell from 50.9 to 50.3 in February, weaker than expected.
NZD/USD Remains Defensive Around 0.5610 Amid Trade War Concerns
The NZD/USD pair continues to face downward pressure, trading near 0.5610 in the early Asian session on Tuesday. The New Zealand Dollar (NZD) is struggling against the US Dollar (USD) as rising trade tensions between the United States (US) and China weigh on market sentiment.
Escalating US-China Trade Tensions Impact NZD
Tensions between the world’s two largest economies have intensified following the US decision to impose a 10% tariff on Chinese imports. In response, China’s Commerce Ministry has pledged to take “necessary countermeasures” to defend its economic interests.
Since New Zealand’s economy is closely tied to China’s trade performance, negative developments in China-US relations often lead to weakness in the Kiwi dollar. As a result, traders are closely monitoring China’s potential retaliatory actions, which could further impact NZD/USD.
US Economic Data Limits USD Gains
On the US Dollar side, recent economic data suggests potential weakness in the US manufacturing sector. The ISM Manufacturing PMI fell to 50.3 in February, down from 50.9 in the previous month, and below market expectations of 50.5. This data indicates a slowdown in manufacturing activity, which could cap USD’s gains and provide some support for NZD/USD.
Upcoming Events to Watch
- Federal Reserve Officials’ Speeches: Traders will be paying close attention to statements from Fed members Thomas Barkin and John Williams later on Tuesday. Any hints regarding the Fed’s monetary policy outlook could impact USD volatility.
- Australia’s Q4 GDP Release: On Wednesday, the release of Australia’s Gross Domestic Product (GDP) for Q4 could influence market sentiment in the Asia-Pacific region, indirectly affecting NZD/USD movements.
Conclusion
The NZD/USD pair remains vulnerable as trade war concerns put pressure on the New Zealand Dollar. While softer US economic data could limit the downside, traders will be watching Fed comments and Australia’s GDP for further direction. In the near term, risk sentiment and trade-related developments will continue to dictate NZD/USD price action.
