NZD/USD remains under pressure near 0.5695 during Monday’s Asian session, as the US Dollar strengthens amid rising geopolitical tensions in the Middle East. The pair continues to trade defensively, with investors favoring the Greenback due to its safe-haven appeal.
Recent developments involving Donald Trump have heightened market uncertainty. A firm deadline was set for Iran to reopen the Strait of Hormuz, alongside warnings of potential strikes on critical infrastructure if demands are not met. In response, Iranian officials signaled they would retaliate against similar targets. This escalation has increased risk aversion across global markets, supporting demand for the US Dollar and weighing on risk-sensitive currencies like the New Zealand Dollar.
Looking ahead, attention turns to the upcoming policy decision from the Reserve Bank of New Zealand, scheduled for Wednesday. Markets widely expect the central bank to keep its Official Cash Rate unchanged at 2.25%. However, the forward guidance will be key in shaping the Kiwi’s next move.
RBNZ Governor Anna Breman has indicated that policymakers may look through short-term inflation spikes driven by energy prices. At the same time, she emphasized that the central bank remains prepared to tighten policy if inflation expectations become unanchored over the longer term.
Some analysts believe the RBNZ could shift toward a more hawkish tone in the coming months. Market pricing already reflects around a 40% probability of a rate hike by September 2026, with a full 25-basis-point increase expected by the end of the year. This outlook could provide some underlying support for the Kiwi, though it is currently being overshadowed by global risk sentiment.
In the near term, NZD/USD is likely to remain sensitive to geopolitical headlines and shifts in risk appetite, with safe-haven flows continuing to favor the US Dollar.
Trade Idea:
Sell NZD/USD on rallies toward 0.5730, targeting 0.5620, with a stop above 0.5780, as geopolitical risks support USD while limiting Kiwi recovery despite RBNZ outlook.