NZD/USD Faces Selling Pressure Amid Escalating Geopolitical Tensions

During the early European session on Friday, the NZD/USD pair remains under selling pressure, hovering around 0.5880. The prevailing risk-off sentiment, fueled by escalating tensions between Israel and Iran, bolsters the US Dollar (USD) and weighs on NZD/USD. Concurrently, the US Dollar Index (DXY) advances above 106.20, nearing its highest level since November 2023.

According to US officials, Israel conducted military strikes against Iran, informing the Biden administration of an imminent attack within the next 24 to 48 hours. Notably, Israel assured that Iran’s nuclear facilities would not be targeted. Investors closely monitor developments surrounding geopolitical tensions in the Middle East, with turmoil potentially driving safe-haven flows toward the USD.

Furthermore, the likelihood of the US Federal Reserve (Fed) postponing interest rate cuts offers support to the USD. Several Fed officials concur that US inflation remains elevated, necessitating increased confidence in its trajectory before adjusting monetary policy.

On the Kiwi front, data from Statistics New Zealand indicates a continued decline in inflation, albeit remaining above the Reserve Bank of New Zealand’s (RBNZ) target range of 1 to 3%. This scenario may prompt the RBNZ to maintain high interest rates for an extended period, potentially mitigating losses for the New Zealand Dollar (NZD).

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