The NZD/USD currency pair weakened to around 0.5820 during early European trading hours on Tuesday, as the US Dollar gained strength against the New Zealand Dollar. This movement was attributed to heightened concerns over the ongoing US-Israeli war on Iran, which has entered its third week. Market participants are worried that a surge in Crude Oil prices following US-Israel strikes on Iran could revive inflationary pressures, potentially prompting the US Federal Reserve to delay interest rate cuts [1].
The Federal Reserve's interest rate decision, scheduled for Wednesday, is expected to result in no change, keeping the benchmark rate in the current range of 3.50% to 3.75%. Traders are closely watching Fed Chair Jerome Powell’s remarks during the post-decision press conference, which may be his second to last as his term ends in May. Any hawkish comments from Fed officials could further strengthen the US Dollar and act as a headwind for NZD/USD in the near term [1].
Attention will also shift to New Zealand’s Gross Domestic Product (GDP) report for the fourth quarter, due on Thursday. The GDP is projected to grow by 0.4% quarter-on-quarter and 1.6% year-on-year. Stronger-than-expected GDP figures could provide support for the Kiwi against the US Dollar [1].
CONCLUSION
Geopolitical tensions and anticipation of the Fed's rate decision have pressured NZD/USD lower, with the pair trading near 0.5820. While the Fed is expected to keep rates unchanged, hawkish commentary could further boost the US Dollar. Upcoming New Zealand GDP data may offer a potential rebound for the Kiwi if results exceed expectations.