On Thursday, major currency pairs including NZD/USD, AUD/USD, and EUR/USD experienced notable declines amid heightened risk-off sentiment driven by escalating conflict in the Middle East and robust US economic data. NZD/USD fell over 0.7%, closing near 0.5900 and marking its lowest level since late January, effectively erasing most of its February gains. The Reserve Bank of New Zealand (RBNZ) maintained its Official Cash Rate at 2.25% in February, with Governor Anna Breman signaling a dovish outlook by pushing the first potential rate hike to late 2026 at the earliest. This stance led to a drop in market pricing for a September hike from 68% to about 40%, and the widening policy gap with the Reserve Bank of Australia (RBA), which raised rates to 3.85% in February, further pressured the Kiwi. Additionally, surging US Dollar strength, fueled by safe-haven demand as the Strait of Hormuz was effectively closed and US crude oil prices surged above $80 per barrel, exacerbated NZD/USD weakness due to New Zealand's reliance on imported oil. The Federal Reserve (Fed) held rates at 3.50%-3.75% in January, with minutes showing a hawkish tilt, and market attention is now on Friday's Non-Farm Payrolls (NFP) report, forecast around 60K [1].
AUD/USD slid nearly 1% to finish near 0.7010 after briefly testing below the 0.7000 handle. The pair's decline erased most of the week's earlier gains, with price action remaining within a 150-pip consolidation band between 0.7000 and 0.7150. The RBA's February rate hike to 3.85% and Governor Michele Bullock's comments that the March meeting is 'live' for another move kept hawkish expectations alive, though market pricing currently implies only a 30% chance of a March hike, with a move to 4.10% in May fully priced. Q4 GDP data showed the Australian economy expanded 0.8% quarter-on-quarter and 2.6% year-on-year, the strongest pace since early 2023. However, surging crude oil prices and ongoing geopolitical tensions have raised fresh inflation concerns, which Bullock flagged as a risk to domestic inflation. The US Dollar's strength, supported by safe-haven flows and anticipation of the NFP report, also contributed to AUD/USD's decline [2].
EUR/USD edged lower by 0.21% to trade near 1.1609, pressured by risk aversion and solid US labor data. US Initial Jobless Claims for the week ending February 28 came in at 213K, below the expected 215K, and Challenger, Gray & Christmas reported announced layoffs dropped to 48,300 in February, a 55% decrease from January's 108,435. Richmond Fed President Thomas Barkin expressed concerns about persistent inflation and noted the labor market's strength. The European Central Bank (ECB) kept rates unchanged at its latest meeting, discussing the potential for inflation to fall below the 2% target, though this meeting occurred before the recent escalation in Middle East tensions. The conflict has notably impacted Europe due to its reliance on energy imports. Upcoming data releases include Eurozone employment and GDP figures, as well as US Retail Sales and NFP, with the latter expected at 59K and the Unemployment Rate at 4.3% [3].
Across all three pairs, technical analysis points to a bearish or mildly bearish near-term bias, with key support and resistance levels identified for each. The market's focus remains on the outcome of Friday's US NFP report, which is seen as the next major event risk for currency markets [1][2][3].
CONCLUSION
Escalating geopolitical tensions and strong US economic data have driven broad US Dollar strength, resulting in significant declines for NZD/USD, AUD/USD, and EUR/USD. Central bank policy divergence and surging oil prices have further pressured the Kiwi and Aussie, while the Euro remains vulnerable due to Europe's energy import dependence. Market participants are now closely watching Friday's US Non-Farm Payrolls report for further direction.