The New Zealand dollar eased to around $0.587 as the US dollar firmed, with investors awaiting US inflation data for clearer guidance on the Federal Reserve’s interest rate outlook. A stronger-than-expected CPI print could bolster expectations of tighter US monetary policy, lending further support to the greenback.
Domestically, markets continue to price in a rate hike from the Reserve Bank of New Zealand in September, after the central bank indicated that additional tightening may be required to fully withdraw monetary stimulus and keep inflation in check. However, last week’s weaker labour market figures have cast doubt on how aggressively the RBNZ can proceed with further increases.
At the same time, lingering uncertainty over the chances of a Middle East peace agreement that might reopen the Strait of Hormuz weighed on market sentiment. In political developments, New Zealand Prime Minister Christopher Luxon held on to his position following a leadership vote by lawmakers in his own party, less than three months before the election.
