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- NZD/USD weakens as a complex Middle East situation sparks risk aversion.
- Trump claimed Iran agreed to nuclear inspections, but Iran countered that real negotiations have not yet started.
- Markets widely expect the RBNZ to hike its Official Cash Rate by 25 basis points to 2.5% in July.
NZD/USD continues its losing streak for the sixth consecutive day, trading around 0.5660 during the Asian hours on Wednesday. The pair weakens as the US Dollar (USD) gains ground in a highly complex geopolitical landscape.
Traders are carefully navigating conflicting signals regarding a potential United States (US)-Iran diplomatic breakthrough. While US President Donald Trump stated that Iran had “fully and completely” agreed to open its facilities to nuclear inspections, Iranian Foreign Minister Abbas Araghchi quickly tempered expectations by clarifying that substantive nuclear negotiations have not actually begun.
Additionally, Iran’s chief negotiator issued a stern warning that the strategic Strait of Hormuz will never return to its pre-war status and will remain firmly under Iranian oversight. Meanwhile, diplomatic efforts showed signs of progress elsewhere as Washington hosted a fresh round of talks between Israel and Lebanon, aimed at securing a ceasefire with Iran-backed Hezbollah.
The US Dollar also received support from strong macroeconomic indicators that reinforced the narrative of “US exceptionalism.” June’s flash estimate for the US S&P Global Composite Purchasing Managers’ Index (PMI) climbed to 52.2, comfortably beating May’s reading of 51.5 and signaling healthy business expansion.
The US manufacturing sector showed remarkable resilience, with output jumping to 55.7 from the previous month’s 55.1, easily outperforming forecasts of 54.8. Simultaneously, the Services PMI printed at 51.3, ticking up from May’s 50.7 and clearing the consensus estimate of 51.0, proving that demand in the broader service economy remains incredibly sticky.
On the other side of the ledger, the Reserve Bank of New Zealand (RBNZ) is widely expected to raise its Official Cash Rate (OCR) by 25 basis points to 2.5% in July. These hawkish RBNZ expectations are strongly backed by accelerated inflationary pressures within the domestic economy. This policy outlook gained further traction after first-quarter Consumer Price Index (CPI) data remained steady at a stubborn 3.1%, keeping the pressure on New Zealand policymakers to act.
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