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29/06/26
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NZD/USD Holds Gains as Risk Sentiment Improves and Fed Outlook Supports Dollar
NZD/USD eased slightly after opening with a bullish gap, trading near 0.5640 in Asian hours on Monday. Even so, the pair remained in positive territory as the US Dollar softened on reduced safe-haven demand. That move followed reports that Washington and Tehran had agreed to stop attacks on one another ahead of renewed peace talks in Doha this week.
Market participants remain cautious because Middle East developments are still fluid. Sentiment has improved after days of retaliatory strikes, including an incident on Thursday when an Iranian projectile struck a cargo vessel. Since then, both sides have accused each other of breaching the June 17 interim ceasefire. Delegations from the two countries are scheduled to meet in Qatar on Tuesday to seek a broader settlement.
The US Dollar is finding some support from expectations that the Federal Reserve will keep policy restrictive for longer. Pricing in the interest-rate market now implies a 59.7% chance of a rate hike in September 2026. Attention is turning to this week’s labor-market data, especially Thursday’s Nonfarm Payrolls report, which could help clarify the Fed’s policy path. Economists expect June employment to rise by 114,000, while the unemployment rate is projected to hold steady at 4.3%.
The New Zealand Dollar is also facing pressure from a weaker domestic outlook. Investors are awaiting June consumer and business confidence figures after May readings remained subdued. Although the easing in oil prices has reduced some short-term inflation concerns, the earlier energy shock still weighs on the broader economic picture.
As a result, expectations for the Reserve Bank of New Zealand have become less aggressive. Markets are now pricing in two rate increases this year, down from three previously. That shift suggests the central bank may have less room to tighten than traders had assumed earlier, leaving the currency vulnerable if domestic data fail to improve.
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