New Zealand Dollar slides below mid-0.5800s vs USD amid Iran risks, ahead of RBNZ decision

NZD/USD attracts fresh sellers as geopolitical risks help demand for the safe-haven USD.
Reviving inflation fears bolster hawkish Fed bets and lend additional support to the buck.
The downside seems limited as traders opt to wait for the RBNZ decision on Wednesday.

The NZD/USD pair comes under renewed selling pressure on Tuesday and slide back below mid-0.5800s during the first half of the European session. The intraday decline is sponsored by a modest US Dollar (USD) strength, albeit the downside seems limited ahead of the Reserve Bank of New Zealand's (RBNZ) rate decision on Wednesday.

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The RBNZ is widely expected to leave the Official Cash Rate (OCR) unchanged at 2.25% for a third straight meeting. Traders, however, are pricing in a 25-basis-point (bps) rate hike at the July 8 meeting, and a total of 125 bps of tightening over the next twelve months. Meanwhile, the focus will be on the accompanying policy statement and the post-meeting press conference, where comments by RBNZ Governor Anna Breman will drive the New Zealand Dollar (NZD) and provide a fresh impetus to the NZD/USD pair.

Heading into the key central bank event, mixed signals over a potential US-Iran peace deal help the safe-haven USD to attract some buyers following the overnight fall to over a one-week low and undermine the risk-sensitive Kiwi. According to media reports, US forces conducted self-defense strikes in southern Iran on Monday, targeting missile launch sites and Iranian boats attempting to emplace mines. This, along with disagreements over Iran's nuclear program and the Strait of Hormuz, keeps a lid on the optimism.

Meanwhile, the US-Iran standoff triggers a modest recovery in Crude Oil prices, reviving inflation fears and bolstering expectations for a more hawkish US Federal Reserve (Fed). This further supports the Greenback and exerts downward pressure on the NZD/USD pair. Traders now look forward to the release of the Conference Board's US Consumer Confidence Index for short-term opportunities, though the focus will be on the Prelim US GDP and the US Personal Consumption Expenditures (PCE) Price Index on Thursday.

Economic Indicator

RBNZ Press Conference

Following the Reserve Bank of New Zealand's (RBNZ)monetary policy decision, the Governor gives a press conference explaining the rationale behind the decision. The comments may influence the volatility of the New Zealand Dollar (NZD) and determine a short-term positive or negative trend.

Why it matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Anna Breman's press conference.

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