- The New Zealand Dollar drifts lower with Investors awaiting news from the US-China trade negotiations
- The pair is trimming gains following last week’s appreciation amid higher hopes for Fed cuts.
- Investors are awaiting US CPI data, due on Tuesday, for a better assessment of the Fed’s monetary policy plans.
The New Zealand Dollar is on its back foot on Monday, despite the moderate risk-on mood, and has drifted below the 0.5950 level against the US Dollar, with investors cautious as US and Chinese representatives attempt to reach a deal to extend their trade truce.
Markets remain calm as traders price some deal that would avoid a re-escalation of the trade war between the world’s two largest economies, and that might boost negative pressure on the NZD, as China is New Zealand’s main trading partner.
The main friction appears to be the US restrictions on AI chips to China, while the Asian Country showed security concerns about Nvidia’s H20 semiclnductors. The ball seems to be on US President Trump’s roof, but he is showing an unusual silence, which keeps investors on edge as the deadline for a deal is August 12.
The pair is now giving away gains following a 0.65% appreciation last week, as higher bets for Fed easing in September weighed on the US Dollar. Trading is likely to remain subdued on Monday, as investors await US CPI data due on Tuesday for more clues about the US central bank’s easing calendar.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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