Trump's Iran Stance Triggers Risk Aversion, NZD Declines
US President Donald Trump's stance on Iran has taken center stage in global markets, leading to increased risk aversion and impacting currency values. The New Zealand Dollar (NZD) is one of the currencies affected by this shift, with its value declining due to changing market dynamics.
The US Federal Reserve's hawkish expectations have been tempered by a recent decline in July US Nonfarm Payrolls and modest consumer price inflation figures. This has weakened the case for imminent monetary tightening, causing the probability of a Fed rate hike at the next meeting to fall to 35%, down from 47% a month ago.
The Reserve Bank of New Zealand (RBNZ) is expected to deliver another 25-basis-point rate hike next month, but Commerzbank's Volkmar Baur notes that New Zealand's full inflation figures are only released quarterly. However, the monthly Selected Price Index, which typically reflects the trend in the full inflation figures, fell to 3.5% year-over-year in July, down from 4.9% in June.
While this underscores the recent softening in inflation that underpins expectations for the RBNZ to pause after July's rate hike, Volkmar Baur highlights the importance of this monthly index as a useful gauge of future inflation trends.