NZD/USD slips below 0.5900 as geopolitics boost USD despite fading Fed hike bets

NZD/USD slips below 0.5900, extending its pullback from the 0.5920-0.5925 range reached earlier in the week — the highest level since March 11. The move follows a second straight day of declines, driven by renewed demand for the US Dollar as a safe-haven asset amid escalating tensions in the Strait of Hormuz. A US naval blockade of Iranian ports has heightened regional instability, boosting the greenback even as other factors constrain its broader rally. Despite a 10-day truce between Israel and Lebanon, investors are cautious, turning to the USD for protection. That demand has pressured NZD/USD, dragging it lower in early European trading. Yet the downside remains limited. Hopes for diplomacy have risen after US President Donald Trump suggested Iran is near a deal, and the Wall Street Journal reported Washington and Tehran have agreed in principle to fresh talks — though no date or location has been set. Those prospects are weighing on the USD’s upside. So are shifting monetary expectations: traders now assign only a 30% probability to a Fed rate cut by year-end, down from earlier, more hawkish pricing. That erosion in rate hike bets curbs aggressive USD longs and supports the New Zealand dollar. With FOMC speakers due to address markets, traders may await further signals. But for now, the pair is still headed for a second consecutive weekly gain, reflecting underlying resilience despite geopolitical headwinds.