NZD Under Pressure as Geopolitical Tensions and Fed Hike Expectations Rise

The New Zealand Dollar (NZD) is feeling pressure against the US Dollar (USD), as tensions rise in the Strait of Hormuz and expectations grow for a potential interest rate hike by the Federal Reserve.

Ongoing negotiations over the reopening of the strategic waterway have reached an advanced stage, according to Qatar. However, Tehran maintains several conditions before agreeing to reopen the strait, including payment from Washington for war reparations.

The uncertainty surrounding the Strait of Hormuz is supporting energy prices, with West Texas Intermediate (WTI) trading at around $82.10, a 6% increase since the start of the week.

This, in turn, has revived concerns about US inflation and increased expectations for further monetary tightening by the Federal Reserve. Markets now assign approximately a 50% chance to a 25-basis-point interest rate hike at the September meeting, up from around 42% on Friday.