• NZD/USD edges lower around 0.5880 at the start of the week.
• Rising tensions between the US and Iran revive demand for safe-haven assets.
• Markets now focus on New Zealand inflation data and US Retail Sales due on Tuesday.

NZD/USD trades around 0.5880 on Monday, slipping by 0.06% at the time of writing as the New Zealand Dollar (NZD) weakens modestly against the US Dollar (USD).

The pair remains under pressure as renewed geopolitical tensions in the Middle East support demand for the US Dollar. The United States (US) and Iran are once again at odds after Tehran accused Washington of violating the ceasefire through the continuation of a maritime blockade. Iranian officials also signaled that no new negotiations with the US are currently planned, which has revived risk aversion in global markets.

In addition, uncertainty surrounding the Strait of Hormuz continues to weigh on sentiment. Iran briefly indicated a possible reopening of the strategic maritime route before reversing the decision, maintaining the blockage following US and Israeli strikes earlier this year. These developments have reinforced the safe-haven appeal of the US Dollar.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against a basket of six major currencies, is trading slightly higher around 98.30, reflecting renewed demand for defensive assets. Several Federal Reserve (Fed) officials have also warned that a prolonged conflict in the Middle East could push energy prices higher, increasing inflation risks and potentially forcing the Fed to keep interest rates elevated for longer.

On the domestic front, New Zealand trade data provided mixed signals. The country posted a monthly trade surplus of NZD 698Mn in March, reversing a deficit of NZD 365M recorded in February. Exports rose 7.3% YoY to a record NZD 7.94B, while imports increased 9.6% to NZD 7.25B. However, the annual trade balance still showed a deficit of NZD 3.19B.

Developments in China, New Zealand’s largest trading partner, also remain in focus. The People’s Bank of China (PBoC) left its one-year Loan Prime Rate unchanged at 3% and its five-year rate at 3.5%, signaling a cautious stance as authorities continue to monitor the economic outlook.

Looking ahead, traders will closely watch New Zealand’s first-quarter Consumer Price Index (CPI) report scheduled for Tuesday. On the US side, the March Retail Sales data will also attract attention, as investors assess the strength of consumer demand and its potential implications for the Fed’s monetary policy path.