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RBNZ’s Gai says U.S. tariffs a negative demand shock for New ZealandReserve Bank of New Zealand Monetary Policy Committee member Prasanna Gai said on Friday that U.S. tariffs have delivered a negative demand shock to New Zealand’s small, trade-dependent economy, adding to the headwinds already restraining growth.Speaking at an event in Melbourne, Gai said the impact of tariffs, coupled with a broader uncertainty shock, had partly offset the effects of monetary easing undertaken since 2024. The RBNZ has cut interest rates by 300 basis points since August 2024 in an effort to revive demand and support employment.Despite those efforts, New Zealand’s economy remains sluggish. With inflation now comfortably within the 1–3% target band, markets believe policymakers retain room to reduce rates further if global weakness and trade disruptions continue to weigh on activity.
This article was written by Eamonn Sheridan at investinglive.com.
💡 DMK Insight
U.S. tariffs are hitting New Zealand hard, and here’s why that matters for traders: The Reserve Bank of New Zealand (RBNZ) is signaling that these tariffs are a significant negative demand shock, which could lead to tighter monetary policy down the line. For traders, this means keeping an eye on the NZD/USD pair, as any further deterioration in trade relations could weaken the Kiwi. With New Zealand’s economy being heavily reliant on exports, especially to the U.S., a slowdown could trigger a bearish sentiment in the currency. If the NZD breaks below recent support levels, it could signal a broader sell-off. But don’t overlook the potential for a contrarian play here. If the RBNZ decides to cut rates in response to these pressures, it might create a buying opportunity for those looking to capitalize on a rebound in the currency once the market stabilizes. Watch for any comments from the RBNZ in the coming weeks, as they could provide clues on their next moves. Key levels to monitor include the NZD/USD support around 0.5900, which if breached, could lead to further declines.
📮 Takeaway
Keep an eye on the NZD/USD pair; a break below 0.5900 could trigger significant selling pressure amid tariff impacts.
