The NZD/USD pair experienced a decline after seeing modest gains the day before, trading around 0.5860 during Asian hours on Tuesday. This drop in the currency pair is attributed to the weakening of the US dollar (USD), which has faced increased demand for safe-haven currencies amid uncertainty regarding the peace deal between the US and Iran.
According to reports from FOX News, the US military conducted a self-defense strike in southern Iran on Monday. As per a spokesperson from the U.S. Central Command, the strike targeted a missile launch site and an Iranian vessel that was reportedly deploying a mine. The military emphasized its commitment to restraint and protecting its troops during the ceasefire period.
However, Bloomberg noted that President Donald Trump mentioned on Monday that negotiations for a deal with Iran aimed at ending the conflict and reopening the Strait of Hormuz are “progressing well.” This has traders closely monitoring developments related to the US-Iran peace deal, as any signs of escalating tensions in the Middle East could lead to an increase in safe-haven currencies like the dollar, which would create challenges for major currency pairs.
Regarding monetary policy, the Reserve Bank of New Zealand (RBNZ) is expected to keep the official cash rate steady at 2.25% on Wednesday. On the other hand, market indicators hint that future policy tightening is becoming increasingly likely; the probability of a rate hike in July is around 80%, with full pricing for a rate increase by September.
The expectations for a hawkish stance from the RBNZ are influenced by disruptions to global energy supplies, which have heightened inflation concerns. Consequently, the central bank is likely to revise its projections for inflation and the future path of the policy rate in its upcoming meeting.
