• NZD/USD regains positive traction on Wednesday in the wake of the RBNZ’s hawkish outlook.
• Geopolitical risks and Fed rate hike bets continue to underpin the USD, capping spot prices.
• The focus now shifts to the US PCE Price Index and the preliminary US GDP report on Thursday.

The NZD/USD pair catches aggressive bids in reaction to the Reserve Bank of New Zealand's (RBNZ) hawkish on-hold rate decision on Wednesday, reversing the previous day's losses to a nearly one-week low. Spot prices, however, struggle to build on the momentum and remain capped near the 0.5880 region through the first half of the European session.

As was widely expected, the RBNZ held the Official Cash Rate (OCR) at 2.25% for the third consecutive meeting in May. The central bank, however, struck a more hawkish tone in the accompanying policy statement and stated that the OCR will most likely need to increase sooner and by more than envisaged in the February monetary policy statement. This, in turn, provides a goodish intraday lift to the New Zealand Dollar (NZD).

Meanwhile, investors remain hopeful about tentative progress in US-Iran diplomatic talks, which eases fears of severe energy supply disruptions and leads to a modest downtick in Crude Oil prices. This offsets inflationary concerns and undermines the US Dollar (USD), lending additional support to the NZD/USD pair. However, the US-Iran standoff over key issues, including Tehran's nuclear program and the Strait of Hormuz, caps the optimism.

Furthermore, US attacks on Iran have dented hopes for a deal to end a three-month-old war and keep geopolitical risks in play. Adding to this, bets that the US Federal Reserve (Fed) will raise interest rates by the end of this year should limit USD losses and act as a headwind for the NZD/USD pair. This makes it prudent to wait for a move beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart before positioning for further gains.

Moving ahead, there isn't any relevant market-moving US economic data due for release on Wednesday, leaving the USD at the mercy of fresh developments surrounding the Middle East crisis. Apart from this, the US Personal Consumption Expenditures (PCE) Price Index, along with the prelim US GDP on Thursday, would play a key role in influencing the USD price dynamics and provide some meaningful impetus to the NZD/USD pair.