New Zealand's Inflation Outlook: New Zealand's inflation dynamics are less directly impacted by US-imposed tariffs, allowing for more stable monetary policy expectations. This stability could support the New Zealand dollar (NZD) relative to the Canadian dollar (CAD).

Canada's Vulnerability to US Tariffs: The proposed 25% tariffs on Canadian imports by the US place significant pressure on Canada's economy. Given that the US is Canada’s largest trading partner, these tariffs could weaken the CAD due to anticipated disruptions in trade and potential economic slowdown.

Commodity Price Divergence: While both New Zealand and Canada are commodity-exporting nations, New Zealand's export profile (focused on agricultural goods) is less directly tied to the sectors likely to be impacted by US trade policy, such as energy and industrial goods, which dominate Canada’s exports. This divergence could favor the NZD.

Market Sentiment and Diversification: The NZD may benefit from investor rotation into currencies less exposed to US trade policy risks, while the CAD faces headwinds from its proximity and dependence on US trade.

LONG NZDCAD

Jan 22 2025