Geopolitical risks lift the USD, but softer US jobs and inflation data reduce expectations for a September Fed rate increase.
The NZD/USD pair fell to around 0.5875 in early European trading Wednesday, pressured by rising Middle East tensions that bolstered demand for the safe-haven USD. Iran’s warning to Gulf states against aiding US military operations added to regional uncertainty, supporting the greenback’s strength.
Recent US economic data, including unexpected job losses in July and subdued inflation, have lowered expectations for a Federal Reserve rate hike in September. Analysts note that benign inflation and labor market softness make further tightening unlikely, capping USD gains.
Despite the dip, the NZD remains slightly above its 12-month rolling average, with strategists questioning the Reserve Bank of New Zealand’s (RBNZ) implied tightening path. Market pricing for additional RBNZ hikes may be overstated, according to BNY analysts.