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NZD/USD slides as risk aversion outweighs hawkish RBNZ expectations

Even after New Zealand’s annual inflation rose to 4.1% in Q2, investors favored the US dollar as US-Iran tensions escalated, keeping NZD/USD around 0.5815.

Reported · Written up by our desk · Major Pairs

FXStreet reports that NZD/USD traded around 0.5815 on Wednesday, down 0.16% on the day, as markets leaned toward the US dollar amid worsening risk sentiment tied to US-Iran tensions.

The outlet links the currency move to stronger-than-expected New Zealand inflation, with annual CPI accelerating to 4.1% in the second quarter from 3.1% in the prior quarter. The print exceeded both market expectations of 4.0% and the RBNZ forecast of 3.9%, the highest since Q4 2023, reinforcing expectations for additional RBNZ tightening including another rate hike at the September meeting.

FXStreet notes that the RBNZ raised its Official Cash Rate by 25 basis points to 2.50% on July 8 and signaled that further OCR increases appear likely. It also cites BBH forecasts for 60 bps of hikes by year-end, and TD Securities expectations for continued upside inflation risks as renewed Middle East tensions push Brent above $90.

Despite the hawkish monetary backdrop for the New Zealand dollar, FXStreet says safer-asset demand has limited NZD/USD gains. The outlet points to US President Donald Trump warning the US would strike Iranian bridges and power plants if Tehran attacks another vessel in the Strait of Hormuz, raising fears of a broader conflict and additional energy supply disruptions.

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