• The New Zealand Dollar gains ground as easing tensions between the US and Iran improve market sentiment.
• The announced reopening of the Strait of Hormuz drives Oil prices lower and eases global inflation concerns.
• Investors now await the Federal Reserve’s monetary policy decision later this week.

NZD/USD trades around 0.5840 at the time of writing on Monday, up 0.17% on the day. The pair benefits from broad-based US Dollar (USD) weakness as markets welcome news of a framework agreement between the United States (US) and Iran aimed at ending the conflict between the two countries.

The improvement in risk sentiment follows comments from US President Donald Trump, who said that the Strait of Hormuz would be reopened as part of the agreement. Iranian authorities also confirmed the development, while officials from both sides indicated that a memorandum of understanding is expected to be signed in Switzerland on Friday. According to US media reports, the ceasefire that has been in place since April will be extended to allow further negotiations.

This geopolitical easing is weighing on the US Dollar. The US Dollar Index (DXY) starts the week on the defensive and falls toward the 99.50 area. At the same time, Crude Oil prices tumble, with West Texas Intermediate (WTI) declining by nearly 5% on the day as investors anticipate a normalization of global energy flows following the announced reopening of the Strait of Hormuz.

The New Zealand Dollar (NZD) remains resilient despite disappointing domestic economic data. The BusinessNZ Performance of Services Index fell to 47.5 in May from a revised 48.7 previously, marking a fourth consecutive month of contraction in the services sector. Meanwhile, the Composite Index declined to 48.4, its lowest level since June 2025, confirming a broader slowdown in New Zealand’s economy.

However, continued weakness in the Greenback is helping support NZD/USD. Investors believe that a less tense geopolitical environment could reduce energy-driven inflation risks, providing the Federal Reserve (Fed) with more room to maintain its current monetary policy on hold. Market participants are now turning their attention to the Fed’s meeting on Wednesday, focusing on updated economic projections and guidance regarding the future path of interest rates.