• NZD/USD gains ground as the US Dollar weakens following the State of the Union speech.
• Donald Trump threatens higher tariffs after the Supreme Court decision.
• The RBNZ keeps an accommodative stance, limiting the New Zealand Dollar’s upside.

NZD/USD trades around 0.5980 on Wednesday at the time of writing, up 0.27% on the day and extending its rebound for a second consecutive day. The pair benefits from a weaker US Dollar (USD) after US President Donald Trump delivered his State of the Union address before Congress. In his speech, Donald Trump said he had engineered a “turnaround for the ages” in the US economy, highlighting easing inflation and solid growth. He also stressed that, in his view, tariffs were a key driver behind this improvement. The president added that he could impose higher duties on countries that “play games” with recent trade agreements after the Supreme Court blocked several of his sweeping global tariff measures. These remarks revive trade uncertainty and temporarily weigh on the Greenback. However, the downside in the US Dollar may remain limited. Investors expect the Federal Reserve (Fed) to keep interest rates unchanged for an extended period. Several central bank officials consider the current monetary policy stance appropriate given the risks surrounding the economic outlook, supporting US yields and capping further weakness in the US Dollar. On the New Zealand side, the Reserve Bank of New Zealand (RBNZ) recently left its Official Cash Rate at 2.25% and reiterated that monetary policy remains accommodative as inflation moves toward the midpoint of its target range. Governor Anna Breman stated that gradually improving economic conditions should support a pickup in growth this year without reigniting strong inflationary pressures. Money markets do not expect a rate hike before late in the year, which could restrain further appreciation of the New Zealand Dollar (NZD) against the US Dollar. Overall, while NZD/USD currently draws support from a softer Greenback amid political and trade-related uncertainty in the United States, the divergence in monetary policy expectations between the Federal Reserve and the Reserve Bank of New Zealand remains a key driver for the pair’s outlook.