NZD/USD holds near one-month high as soft US inflation, Iran diplomacy weigh on Dollar

• NZD/USD trades around 0.5900, close to its highest level in over a month after a strong recent rally.
• Optimism over a potential resumption of US-Iran negotiations supports risk appetite and weighs on the US Dollar.
• Softer-than-expected US inflation data fuels expectations of a less aggressive monetary policy stance.

NZD/USD trades around 0.5900 on Wednesday at the time of writing, virtually unchanged on the day but still close to a one-month high reached on Tuesday at 0.5921. The pair is consolidating after two strong bullish days as investors assess the impact of geopolitical and macroeconomic developments on the US Dollar (USD).

The rebound in the Greenback remains limited despite ongoing tensions in the Middle East, particularly around the Strait of Hormuz. Iran’s ambassador to the United Nations (UN) denounced the maritime blockade imposed by Washington, while the Islamic Revolutionary Guard Corps threatened retaliation. These developments maintain some demand for safe-haven assets and offer modest support to the US Dollar.

However, markets remain broadly optimistic about a possible resumption of diplomatic talks between Washington and Tehran. US Vice President JD Vance indicated that negotiations are ongoing, fueling hopes for a broader agreement aimed at gradually reintegrating Iran into the global economy. US President Donald Trump also stated that a lasting deal could be reached within the next few days, reinforcing the positive risk tone across financial markets.

Against this backdrop, the US Dollar remains broadly under pressure despite the recent rebound. The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of major currencies, trades around 98.25 at the time of press, close to its lowest levels since early March, stabilizing on Wednesday after seven straight days of decline, as investors continued to trim long USD positions.

Recent US macroeconomic data also contributes to limiting the US Dollar’s recovery. The Producer Price Index (PPI) released on Tuesday showed a smaller-than-expected increase in March, suggesting that inflationary pressures linked to rising energy prices remain contained. This downside surprise reduces the likelihood of a near-term tightening move from the Federal Reserve (Fed).

The easing inflation outlook pushed US Treasury yields lower, weighing on the appeal of the US Dollar and supporting risk-sensitive currencies, including the New Zealand Dollar (NZD).

In New Zealand, markets have also been monitoring comments from Reserve Bank of New Zealand (RBNZ) officials, although the remarks did not provide a clear signal regarding the future path of monetary policy. Investors are now turning their attention to upcoming macroeconomic releases in the Asia-Pacific region, particularly China’s first-quarter Gross Domestic Product (GDP) data due on Thursday, which could influence regional sentiment and the outlook for the Kiwi.