• The New Zealand Dollar advances after Iran announced the end of its military operations against Israel.
• Easing risk aversion weighs on the US Dollar and supports risk-sensitive currencies.
• Expectations of a Reserve Bank of New Zealand rate hike in July continue to underpin the Kiwi.

NZD/USD trades around 0.5830 on Monday at the time of writing, up 0.62% on the day after rebounding from a two-month low touched during the Asian session. The New Zealand Dollar (NZD) benefits from a weaker US Dollar (USD) as market sentiment improves amid signs of de-escalation in the Middle East conflict.

The move gained momentum after Iran’s armed forces announced the end of their military operations against Israel, while warning that any renewed Israeli attacks on Lebanon would trigger a stronger response. The statement came as US President Donald Trump said discussions toward a ceasefire between the two sides were underway. These developments reduced demand for safe-haven assets and put downward pressure on the Greenback.

The US Dollar Index (DXY), which measures the US Dollar against a basket of major currencies, falls toward the 99.90 area after recently reaching a two-month high near 100.20. The decline in the US Dollar offsets the impact of Friday’s solid US employment report. Nonfarm Payrolls (NFP) increased by 172K in May, while the Unemployment Rate remained unchanged at 4.3%, confirming the resilience of the US labor market.

Investors are now turning their attention to the release of the US Consumer Price Index (CPI) data on Wednesday. The inflation figures are expected to play a key role in shaping expectations for the monetary policy outlook of the Federal Reserve (Fed), as markets continue to assess the path of interest rates in the coming months.

On the New Zealand side, the New Zealand Dollar remains supported by expectations of tighter monetary policy from the Reserve Bank of New Zealand (RBNZ). Traders continue to price in the possibility of a rate hike as soon as July, with the Official Cash Rate expected to peak near 3.5% next year.

Market participants will also monitor China’s trade balance and inflation data, as well as New Zealand’s Business Purchasing Managers Index (PMI) figures later this week. These releases could provide fresh insight into the regional economic outlook and influence the direction of NZD/USD.