Geopolitical tensions in the Middle East drive USD strength, offsetting NZD support from RBNZ’s 25 basis points rate hike and improved services data.
The NZD/USD pair remains flat near 0.5760 in early European trading as escalating Middle East tensions boost demand for the safe-haven USD. The US launched fresh missile strikes against Iran on Sunday, prompting retaliatory attacks on nations hosting US forces, including Kuwait, Qatar, and the UAE. Iran described the strikes as undermining recent diplomatic efforts, further heightening regional instability.
The Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate by 25 basis points to 2.50% last week, its first hike in over three years, signaling potential further tightening. New Zealand’s services sector also showed improvement, with the Performance of Services Index rising to 50.6 in June from a revised 48.0 in May. These factors provide underlying support for the NZD.
Ongoing geopolitical risks may sustain USD strength in the near term, counterbalancing the RBNZ’s hawkish stance and stronger domestic data.