• The New Zealand Dollar rises for a second consecutive day against the US Dollar.
• New Zealand inflation comes in above expectations, reinforcing bets on tighter monetary policy.
• Market sentiment improves slightly amid hopes for renewed talks between the United States and Iran.

NZD/USD trades around 0.5900 on Tuesday at the time of writing, up 0.20% on the day, extending its rebound from the lows near 0.5850 recorded on Monday. The pair’s upward movement mainly reflects the strength of the New Zealand Dollar (NZD), supported by stronger domestic inflation data, while the US Dollar (USD) remains constrained by mixed macroeconomic signals.

The latest data show that inflation in New Zealand, measured by the Consumer Price Index (CPI), increased by 0.9% QoQ in the first quarter, beating market expectations of 0.8% and accelerating from the 0.6% rise recorded in the previous quarter. On an annual basis, inflation remained steady at 3.1%, above the 2.9% forecast, confirming that price pressures remain persistent.

These figures keep inflation slightly above the Reserve Bank of New Zealand (RBNZ) target range of 1% to 3% and strengthen speculation about a possible tightening of monetary policy in the coming months. Several market participants now anticipate a potential rate hike as early as the May meeting, which is providing short-term support to the Kiwi.

According to analysts at Commerzbank, a rate increase could indeed provide temporary support to the New Zealand Dollar. However, the bank notes that stagflation risks, particularly linked to rising energy prices, could weigh on growth prospects and limit the medium-term upside potential of the NZD.

On the global front, risk appetite has improved slightly after reports suggesting a possible resumption of talks between the United States (US) and Iran, although uncertainty remains high regarding the timing and credibility of these negotiations. This relative easing in tensions tends to favor risk-sensitive currencies such as the Kiwi.

Meanwhile, the US Dollar Index (DXY), which measures the performance of the US Dollar against a basket of six major currencies, is hovering around 98.30. Investors are assessing the latest US data, including March Retail Sales, which rose by 1.7% MoM, exceeding expectations. Despite the resilience of the US economy, these figures have not been sufficient to fully revive the Greenback’s upward momentum.

Markets are also closely monitoring geopolitical developments in the Middle East as the temporary truce between the United States and Iran approaches its deadline. US President Donald Trump indicated that Washington is ready for military action if negotiations fail, maintaining a high level of uncertainty across global markets.