NZD Weakens Despite Hawkish RBNZ Tone Amid Weakening Fed Hike Expectations

The New Zealand Dollar (NZD) has been weakening despite a hawkish tone from the Reserve Bank of New Zealand (RBNZ), according to FXStreet. The NZD/USD pair depreciated to around 0.5880 during European hours on Tuesday after two days of losses.

The US Dollar (USD) held ground due to safe-haven flows amid escalating geopolitical tensions between the US and Iran, with President Donald Trump stating he has no interest in renewing the expiring agreement with Iran.

However, expectations surrounding a potential Federal Reserve rate hike have weakened, with CME FedWatch Tool data showing the probability of a rate hike at the next meeting has fallen to 35%, down from 47% a month ago. This could potentially weigh on the NZD/USD pair.

Volkmar Baur from Commerzbank notes that while New Zealand's full inflation figures are only released quarterly, there is a useful interim gauge: the Selected Price Index, which fell to 3.5% year-over-year in July, down from 4.9% in June.