• NZD/USD remains under pressure despite relative stability on Tuesday.
• Middle East tensions revive inflation concerns through higher Oil prices.
• Markets await the Federal Reserve decision and New Zealand GDP data.

NZD/USD trades around 0.5860 on Tuesday, posting a slight daily decline after rebounding from intraday lows. The move remains limited but reflects cautious market sentiment as the US Dollar (USD) holds steady and multiple risk factors dominate the macro backdrop.

The US Dollar finds some support amid risk aversion linked to the escalation of the Middle East war, now in its third week. Rising Crude Oil prices are fueling concerns about renewed inflationary pressures, which could complicate the outlook for the Federal Reserve (Fed). In this context, markets widely expect the Fed to keep interest rates unchanged on Wednesday within the 3.50%-3.75% range.

Attention now turns to updated economic projections and, more importantly, Fed Chair Jerome Powell's remarks. Any hawkish tone could strengthen the Greenback in the near term. This meeting may also mark one of Powell’s final appearances as Fed Chair, with his term set to end in May, adding further significance to his communication.

Some institutions have already started adjusting their expectations. Goldman Sachs, for instance, has pushed back its rate cut outlook, citing more persistent inflation, partly driven by geopolitical tensions and energy price dynamics.

On the New Zealand side, investors await the release of Gross Domestic Product (GDP) data for the fourth quarter on Wednesday. Forecasts point to a 0.4% quarterly expansion and 1.7% annual growth.

Overall, the pair remains driven by a fragile balance between US monetary policy expectations and geopolitical developments, while upcoming economic data could set the tone for short-term direction.