NZD Slips as Safe-Haven Demand Lifts USD Amid Middle East Tensions
The New Zealand Dollar (NZD) has slipped against the US Dollar (USD) due to renewed demand for safe-haven assets amid fresh geopolitical tensions in the Middle East. An Israeli airstrike in southern Lebanon has reignited risk aversion, although reports that Iran and Oman are finalizing an agreement on a temporary shipping route through the Strait of Hormuz have helped ease concerns over prolonged disruptions to energy supplies.
The US Dollar is benefiting from this defensive positioning despite another round of mixed US economic data. Initial Jobless Claims edged up to 199K last week from a revised 198K previously, but came in below market expectations of 202K. The release follows Wednesday's weaker ADP employment report. Investors are now turning their attention to Friday's Nonfarm Payrolls (NFP) report for a clearer assessment of US labor market conditions.
Markets continue to scale back expectations for another interest rate hike from the Federal Reserve (Fed). According to the CME FedWatch tool, the chance of a 25-basis-point rate increase in September has fallen to 56.9% from 63.4% a week ago, as traders increasingly believe that the gradual cooling in the labor market could encourage the central bank to adopt a more cautious approach.
Meanwhile, the New Zealand Dollar (NZD) remains weighed down by weaker-than-expected employment data. The report reinforces expectations that the Reserve Bank of New Zealand (RBNZ) will continue to tighten monetary policy at a gradual pace, although markets still fully price in a 25-basis-point rate hike at the September meeting.