• NZD/USD declines for a third consecutive day, trading near 0.5860 on Thursday.
• Rising energy prices and geopolitical tensions support the US Dollar and revive inflation concerns.
• Markets await US PCE inflation data on Friday for further clues on monetary policy.

NZD/USD trades lower on Thursday, hovering around 0.5860 at the time of writing and down 0.90% on the day. The pair is posting a third consecutive daily decline, pressured by renewed strength in the US Dollar (USD) and rising geopolitical tensions.

The US Dollar is gaining traction as markets reassess expectations for monetary policy. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading near 99.70, close to its highest levels since November.

Surging Oil prices are fueling concerns about more persistent inflation, reducing expectations for near-term policy easing from the Federal Reserve (Fed). Markets no longer fully price in even a single 25-basis-point cut this year, providing additional support for the Greenback.

Geopolitical developments are also playing a key role in market sentiment. The war between the United States (US) and Iran entered its thirteenth day on Thursday, with attacks intensifying across the Middle East and little sign of de-escalation. Iran has reportedly targeted commercial vessels near the Strait of Hormuz, a critical global Oil shipping route, raising fears of prolonged disruptions to global energy supply.

Meanwhile, Iran’s new Supreme Leader Mojtaba Khamenei indicated that the closure of the Strait of Hormuz could continue as a strategy to pressure Iran’s adversaries, further increasing uncertainty in energy markets. Although the International Energy Agency (IEA) has announced the release of 400 million barrels from emergency reserves, Oil prices remain highly volatile.

On the New Zealand side, the New Zealand Dollar (NZD) remains under pressure as investors adopt a cautious stance amid heightened geopolitical risks. Rising energy prices are also fueling concerns about domestic inflation in New Zealand, with some analysts expecting price pressures to remain more persistent than previously anticipated, reinforcing expectations of a tighter stance from the Reserve Bank of New Zealand (RBNZ).

Investors now turn their attention to a heavy slate of US economic data scheduled for Friday, including the Personal Consumption Expenditures (PCE) Price Index, the fourth-quarter Gross Domestic Product (GDP) reading, Durable Goods Orders, and the University of Michigan Consumer Sentiment Index. These releases could provide fresh guidance on the trajectory of US monetary policy and influence short-term movements in NZD/USD.