NZD/USD grapples to break below 0.5600 ahead of US PCE inflation data

NZD/USD struggles due to rising concerns over global trade tensions and domestic monetary policy.
The ANZ-Roy Morgan Consumer Confidence index rose to 96.6 in February, slightly higher than January’s 96.0.
Traders adopt caution ahead of the Personal Consumption Expenditures Price Index, the Fed’s preferred inflation measure.

NZD/USD continues its losing streak that began on February 21, hovering around 0.5600 during early European trading on Friday. The New Zealand Dollar (NZD) faces downward pressure despite a private survey indicating a slight rise in consumer confidence for February, as concerns over global trade tensions and domestic monetary policy persist.

The ANZ – Roy Morgan Consumer Confidence inched up to 96.6 in February from 96.0 in the previous month. However, economic outlook perceptions for the next 12 months declined to -16%, while expectations for house price inflation saw a modest increase.

The NZD/USD pair weakens as the safe-haven US Dollar (USD) strengthens amid heightened fears of a global trade war. US President Donald Trump reaffirmed that his proposed 25% tariffs on Mexican and Canadian goods will take effect on March 4, alongside an additional 10% tariff on Chinese imports due to ongoing drug trafficking concerns.

Further exacerbating trade tensions, Trump imposed new tariffs on Chinese goods, adding to the 10% levies introduced on February 4 in response to the fentanyl opioid crisis, bringing the total tariff to 20%. Any further tariff threats from the US could pressure the China-linked NZD, given China’s role as New Zealand’s primary trading partner.

Investors now turn their attention to the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation measure, set for release later in the day.

US-China Trade War FAQs

What does “trade war” mean?

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.

What is the US-China trade war?

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.

Trade war 2.0

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.