NZD Plunges as Oil Prices Soar and Rate Hike Bets Surge

The New Zealand Dollar (NZD) has continued its decline against the US Dollar (USD), reaching around 0.5880 during European hours on Tuesday. The fall comes as investors seek safe-haven assets amidst escalating geopolitical tensions, particularly following Iran's rejection of any future negotiations with US President Donald Trump.

Aximised by heightened concerns about a potential conflict, crude oil prices have surged, pushing US Treasury yields higher and increasing the likelihood of an interest rate hike. Market-implied odds of a 25-basis-point Fed rate hike in September have climbed nearly 52%, up from 44.4% just a day prior.

Cleveland Fed President Beth Hammack emphasized that multiple rate hikes may be needed to control broad-based inflation, arguing that current policy remains insufficiently restrictive. The upcoming Consumer Price Index report will dictate the Fed's trajectory moving forward.