NZD/USD holds above 0.5880 as Middle East tensions cloud rate cut bets

The New Zealand Dollar trades around 0.5885 against the US Dollar, pulling back from monthly highs near 0.5920. Investors are in a wait-and-see mode ahead of US-Iran peace talks scheduled for the weekend. US President Donald Trump expressed optimism about ending the war in Iran following a 10-day ceasefire between Israel and Lebanon. Negotiators from the US and Iran have scaled back ambitions, now seeking a temporary memorandum to prevent escalation, according to Reuters. Heightened Middle East tensions contributed to inflationary pressures in March, reducing market expectations for Federal Reserve rate cuts. CME FedWatch tool shows only 30% probability of a rate cut in 2024, down from over 60% a month ago. Lower odds of Fed rate cuts reduce the appeal of carry trades involving NZD/USD, limiting upward momentum for the Kiwi despite regional stability. The New Zealand Dollar shows marginal losses as broader risk sentiment and US monetary policy expectations outweigh domestic factors.