• NZD/USD falls as a steady US Dollar draws support from renewed geopolitical tensions in the Strait of Hormuz.
• Traders expect the Fed to keep rates unchanged this month and in September.
• ING anticipates the RBNZ will implement a 25-basis-point rate hike to 2.50% this Wednesday.

NZD/USD inches lower for the second successive day, trading around 0.5700 during the Asian hours on Tuesday. The currency pair depreciates as the US Dollar (USD) holds ground, which could be attributed to the renewed geopolitical tensions in the Strait of Hormuz.

Bloomberg reported, citing a United States (US) official, that Iran fired at least two missiles at commercial vessels transiting the strategic waterway late Monday. While two ships sustained significant damage, no casualties were reported. Separately, the UK Maritime Trade Operations (UKMTO) confirmed that a southbound tanker was struck on its port side by an unknown projectile, which ignited a fire on board.

Market participants scaled back expectations for Federal Reserve rate hikes this month and in September. This shift in sentiment followed a cooling employment report that revealed fewer jobs added across April, May, and June than Wall Street had anticipated. Furthermore, a recent drop in crude oil prices, driven by an OPEC+ production boost and a US-Iran peace deal, has alleviated broader inflationary pressures, softening the urgency for an aggressive Fed policy outlook.

Despite a sharp collapse in oil prices, ING anticipates the Reserve Bank of New Zealand (RBNZ) will implement a 25-basis-point “insurance” rate hike to 2.50% on Wednesday. However, the firm cautions that the tightening could be a one-off move, offering little sustained upward momentum for the New Zealand Dollar (NZD).

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