New Zealand Dollar steadies as Iran talks fails to lift NZD/USD

NZD/USD remains flat after posting major gains in the previous day, trading around 0.5630 during Asian hours on Tuesday. The currency pair is range-bound as the US Dollar (USD) draws support from ongoing market developments, despite rising speculation about a potential diplomatic breakthrough between Washington and Tehran. Lower crude oil prices, now hitting their lowest point since August, reflect growing optimism surrounding Middle East peace negotiations.

Although regional clashes persist, US President Donald Trump stated that further military strikes against Iran seem unnecessary, describing the war as "militarily, effectively over" while maintaining that the US remains "locked and loaded" to protect regional stability at the request of neighboring nations.

Focus in the US now shifts to upcoming economic indicators, headed by the October Consumer Price Index (CPI) report scheduled for Tuesday. Market forecasts anticipate headline CPI rising to 3.9% year-over-year (from 3.7%), while core CPI is expected to edge up from 2.6% to 2.8%. Building on last week's robust Nonfarm Payrolls report, hawkish remarks from Federal Reserve officials—including Richmond Fed President Thomas Barkin and Chicago Fed President Austan Goolsbee—have fueled expectations of higher rates. According to the CME FedWatch Tool, the odds of a Fed rate hike at the December meeting have surged to 84%, up from 76% a day prior.

On the political front in New Zealand, Prime Minister Christopher Luxon appears to have secured enough parliamentary support to maintain power. Preliminary tallies show his Centre-right National Party and its coalition partners holding 67 of the 131 seats in Parliament, despite a notable 30% drop in combined traditional party support as voters gravitated toward minor parties like the Greens and the libertarian Act Party. However, official coalition negotiations remain paused until final election results are certified after November 27, when approximately 400,000 overseas and special votes are fully processed.

Kiwi supported as RBNZ mandate seen staying focused on price stability

Analysts at Brown Brothers Harriman note that New Zealand’s ruling center-right coalition currently “holds a one seat majority following Sunday’s election,” with final results not due until November 27. They highlight that the incumbent coalition led by the National Party “wants to stick to the RBNZ’s sole price stability mandate, which has been in place since December 2023,” in contrast to the Labour Party, which “ran on a proposal to return to a dual inflation-employment mandate.” BBH suggests that this political configuration reduces the perceived risk of a shift back toward a more dovish policy framework at the central bank, helping to underpin the Kiwi.