NZD/USD tumbles below 0.5850 as Trump plans new tariffs on China

• NZD/USD weakens to around 0.5810 in Tuesday’s Asian session. 
• The RBNZ is expected to cut its OCR to 4.25% at its meeting Wednesday.
• The cautious stance from the Fed might support the USD and cap the pair’s upside.

The NZD/USD pair attracts some sellers to around 0.5810 during the Asian trading hours on Tuesday. The rising expectation of aggressive rate cuts from the Reserve Bank of New Zealand (RBNZ) exerts some selling on the Kiwi. All eyes will be on the RBNZ interest rate decision on Wednesday. 

The New Zealand central bank will reduce the Official Cash Rate (OCR) by 50 basis points (bps) to 4.25% on Wednesday, according to the majority of economists by Bloomberg. ANZ analysts highlight that the upcoming RBNZ meeting is unlikely to spark a positive shift for the New Zealand Dollar (NZD) and the ongoing dovish stance from the central bank might continue to undermine the NZD against the US Dollar (USD) in the near term. 

President-elect Donald Trump said the US will impose an additional 10% tariff on Chinese goods on top of all existing levies due to the influx of illegal drugs such as narcotics, per Bloomberg. Early Tuesday, China's ambassador said that US trade policy will impact China and other countries. This, in turn, drags the China-proxy NZD lower as China is a major trading partner to New Zealand.

On the USD’s front, the stronger economic data and the cautious stance from the US Federal Reserve (Fed) might support the Greenback and create a headwind for the pair. Fed Chair Jerome Powell signaled last week that the Fed isn’t necessarily inclined to cut rates at the next upcoming meetings.“The economy is not sending any signals that we need to be in a hurry to lower rates,” said Powell.