• NZD/USD gathers strength to near 0.5745 in Monday’s early European session. 
• Fed’s Powell called the threat of indictment a pretext to pressure rates. 
• The RBNZ’s hawkish stance could underpin the Kiwi.  

The NZD/USD pair gains traction to around 0.5745 during the early European session on Monday. The US Dollar (USD) softens against the Kiwi on renewed concerns over the US Federal Reserve (Fed) independence. Traders will keep an eye on the US Consumer Price Index (CPI) inflation data for fresh impetus, which will be published later on Tuesday. 

Tensions between the White House and the Fed escalated over the weekend as Fed Chair Jerome Powell said that the administration had threatened him with a criminal indictment related to the central bank headquarters renovation. Powell called the threats a “pretext” aimed at putting pressure on the Fed to cut interest rates. The Greenback faces some selling pressure following the headline and creates a tailwind for the pair. 

“This open warfare between the Fed and the U.S. administration … it’s clearly not a good look for the U.S. dollar,” said Ray Attrill, National Australia Bank’s head of currency strategy.

The Reserve Bank of New Zealand’s (RBNZ) hawkish outlook on the future policy path could provide some support to the New Zealand Dollar (NZD). The central bank indicated the rate-cutting cycle is likely complete, but the “door is ajar” for further cuts if the economy underperforms its forecasts. Most economists anticipate the RBNZ to keep the Official Cash Rate (OCR) on hold for most of 2026, with some expecting rate hikes might not occur until late 2026 or early 2027.

On the other hand, US President Donald Trump threatened repercussions if Iranian authorities target civilians, while Tehran warned the US and Israel against any intervention. Rising tensions between the US and Iran could boost the safe-haven currency like the USD against the NZD. 

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