The NZD/USD pair has seen selling pressure for the seventh consecutive day, approaching its lowest point since November 25th. Currently, it trades in the 0.5640-0.5635 range and appears vulnerable due to a strengthening US dollar.
The USD index (DXY), which gauges the dollar against several currencies, reached its peak for the first time since May 2025 this Wednesday, largely spurred by the Federal Reserve’s recent hawkish stance. Notably, nine out of 19 Fed members expressed that interest rates should be raised to tackle stubborn inflation. Combined with mixed narratives from the US and Iran regarding nuclear inspections and a broader risk aversion fueled by a tech-driven market downturn, this has added strain to the NZD/USD pair, benefiting safe-haven assets.
On another note, with traffic resuming in the Strait of Hormuz, crude oil prices have dropped to levels not seen since before the US-Iran conflict. Additionally, a temporary 60-day waiver on sanctions for Iranian crude oil production and sales alleviates supply worries surrounding the black gold. This development is likely to reduce inflationary pressures on consumers, leading many to adjust their expectations regarding Fed rate hikes, potentially curbing the bullish sentiment of the USD.
As market participants remain cautious, especially with the upcoming release of the U.S. Personal Consumption Expenditures (PCE) Price Index later in the North American session, there’s a chance they might sit this one out. That said, a hawkish turn from the Reserve Bank of New Zealand (RBNZ) could support the New Zealand dollar and mitigate losses for the NZD/USD pair. The RBNZ has hinted that the Official Cash Rate could rise to around 2.85% by year-end, suggesting potential rate hikes ahead. So, perhaps it pays to be a bit cautious before anticipating further declines.
