New Zealand Dollar declines as risk-off mood supports US Dollar

• NZD/USD weakens as broad caution and a steady US Dollar kept investors defensive ahead of updates on Iran’s nuclear program.
• Fed is widely expected to keep interest rates unchanged at 3.50% to 3.75% in June.
• China’s Retail Sales fell 0.6% year-on-year in May, missing expectations of a flat reading.

NZD/USD extends its losses for the third consecutive day, trading around 0.5810 during the Asian hours on Tuesday. The pair depreciates as the US Dollar (USD) holds steady amid broad market caution. Investors remain on the defensive as they await further updates regarding Iran’s unresolved nuclear program.

Both Washington and Tehran have not released the official text of the agreement; major shipping lines are delaying vessel rerouting through the strategic waterway until full transparency is established.

Even though US President Donald Trump announced that a memorandum of understanding (MoU) has been signed to end the conflict and reopen the blockaded Strait of Hormuz, market participants remain deeply cautious. According to Iran's semi-official Mehr news agency, the current draft calls for the strait to reopen within 30 days under Iranian arrangements.

The Federal Reserve (Fed) is widely expected to keep its benchmark interest rate unchanged at a target range of 3.50% to 3.75% on Wednesday, which could be attributed to the higher US inflation due to elevated energy prices linked to Middle East tensions. Traders will be closely monitoring the press conference for cues on how new Fed Chair Kevin Warsh intends to lead the central bank into its next era.

The New Zealand Dollar (NZD) struggles following a wave of weak economic data out of China. Because China is New Zealand's largest trading partner, buying roughly one-third of all Kiwi goods exports, the New Zealand Dollar acts as a primary liquid proxy for the Chinese economy.

China's domestic demand slumped sharply in May, with Retail Sales contracting by 0.6% year-on-year against expectations of a flat reading. Additionally, Fixed Asset Investment dropped at a faster pace of -4.1%, failing to meet the projected -2%. While Industrial Production offered a minor bright spot by coming in stronger-than-expected at 4.5%.