The NZD/USD pair experienced renewed selling pressure on Tuesday, dropping below the mid-$0.5800 mark during early trading in Europe. This decline can be attributed in part to slight gains in the US dollar (USD), although the downward movement appears limited as traders await Wednesday’s interest rate decision from the Reserve Bank of New Zealand (RBNZ).
Many anticipate that the RBNZ will maintain the Official Cash Rate (OCR) at 2.25% for a third consecutive meeting. However, there’s some speculation about a possible 25 basis point rate hike at the July 8 meeting, with expectations for a total increase of 125 basis points over the next year. The policy statement, along with the press conference following the meeting, is likely to draw interest, especially comments from RBNZ Governor Anna Breman, which could potentially provide momentum for the New Zealand dollar (NZD) and influence the NZD/USD pair.
The US dollar has seen some buyers in the wake of its recent dip to the lowest point in over a week, primarily due to mixed messages regarding a potential peace deal between the US and Iran. This situation undermines risk-sensitive currencies like the Kiwi. Reports indicate that the US military conducted a self-defense strike on missile launch sites and Iranian vessels in southern Iran. Additionally, ongoing disputes related to Iran’s nuclear program and the Strait of Hormuz have dampened optimism surrounding the situation.
This conflict has, interestingly, contributed to a slow recovery in oil prices, raising inflation concerns and fostering expectations that the US Federal Reserve might adopt a more hawkish stance. Such developments lend support to the greenback, which in turn puts pressure on the NZD/USD pair. Traders are turning their attention to the upcoming release of the Conference Board’s U.S. Consumer Confidence Index, looking for short-term opportunities, while also keeping an eye on Thursday’s preliminary US GDP figures and the U.S. Personal Consumption Expenditures (PCE) price index.
