The pound held steady at $1.344 as investors awaited Middle East developments amid optimism over a potential US-Iran peace deal and diminishing expectations for Bank of England rate hikes. Investors remain focused on the region, heartened by the recent lack of negative signals from both sides and lingering hopes that an agreement to ease tensions and reopen the Strait of Hormuz remains possible despite recent strikes. Traders have trimmed their bets on BoE rate hikes, now expecting about 40 basis points of tightening by year-end, with a roughly 50% chance of a hike next month. Attention now turns to upcoming BoE policymaker speeches for monetary policy signals and political developments around Prime Minister Keir Starmer following Labour’s regional election setbacks.
Euro Near Six-Week Low Amid US-Iran Optimism
The euro hovered around $1.164, close to a six-week low, amid optimism over a potential US-Iran peace deal and reduced expectations for ECB rate hikes. Investors continue to monitor Middle East developments, encouraged by the recent lack of negative signals from both sides and persistent hopes that an agreement to ease tensions and reopen the Strait of Hormuz remains possible despite recent strikes. Money markets now expect the ECB deposit rate to reach 2.6% by December, up from the current 2% but below last week’s 2.75% projection, with an 80% chance of a rate hike next month. Meanwhile, ECB official Isabel Schnabel told Reuters the central bank should still raise interest rates in June even if a peace deal is reached, citing the scale and persistence of the energy shock.
NZD the strongest currency after a hawkish surprise from the RBNZ
RBNZ: hawkish hold The RBNZ delivered a decision that the market interpreted as a classic “hawkish hold.” The Official Cash Rate (OCR) was kept unchanged at 2.25% , but only after a rare 3–3 split within the Monetary Policy Committee. Governor Anna Breman, Karen Silk, and Paul Conway voted to keep rates unchanged, while Carl Hansen, Hayley Gourley, and Prasanna Gai supported an immediate 25 bp hike to 2.50% . Breman’s deciding vote left policy unchanged, but the broader message was clear: the easing phase is over, and the next move will be upward. The RBNZ explicitly stated that the OCR will need to rise sooner and by more than the bank expected as recently as February. A more challenging macroeconomic environment The macroeconomic backdrop has become significantly more complicated. The central bank is now dealing with a negative supply shock stemming from the Middle East conflict — primarily through higher oil, gas, and petrochemical prices — while domestic demand is already beginning to weaken. Inflation is now expected to peak at 4.3% in Q3 2026 , with a return to the 2% inflation target not expected until mid- 2027 . At the same time, business and consumer sentiment indicators, housing market activity, and corporate hiring plans have all deteriorated. In practice, this means that the RBNZ is facing a difficult combination of factors:
- inflation risks are clearly higher, especially if firms and workers begin treating the energy shock as permanent;
- growth risks are clearly lower, as higher fuel costs reduce real incomes, margins, and consumption;
- spare capacity and elevated unemployment should partially limit second-round effects, but not enough for the bank to ignore the risk of inflation becoming entrenched.
Implications for investors The key takeaway for investors is that the decision was not dovish despite rates being left unchanged. All six MPC members agreed that rate hikes at upcoming meetings will likely be necessary to prevent short-term inflation from feeding into medium-term inflation expectations. The updated rate path points to a significantly more restrictive stance in the future, and market commentary suggests a high probability of hikes at the July, September, and October meetings. New Zealand dollar reaction The New Zealand dollar reacted with gains. The market focused more on the hawkish forward guidance than on the hold itself. NZDUSD rose 0.70% toward the 0.5870 area following the decision release. Such a reaction is logical: the split vote, higher OCR path, and clear suggestion that hikes are likely later this year support the currency through expectations of wider interest rate differentials. At the same time, the upside potential may not be one-directional. The same statement also emphasized weaker domestic growth, fragile economic sentiment, and risks to activity, while the RBNZ itself pointed to high volatility in the trade-weighted NZD exchange rate.
Indian Rupee ticks higher as oil prices decline while Iran uncertainty persists
- The Indian Rupee ticks higher against the US Dollar as oil prices decline.
- Iran alleges that the US is violating the ceasefire.
- FIIs turned out to be net sellers on Tuesday, offloading the stake worth Rs. 2,407.87 crore.
The Indian Rupee (INR) trades marginally higher against the US Dollar (USD) in the opening session on Wednesday. The USD/INR pair ticks lower to near 95.70 as oil prices fail to hold their Tuesday’s recovery move, with market participants remaining confident that the United States (US) and Iran are close to reaching a deal.
At press time, the WTI Oil price trades 1.8% lower to near $90.80. Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, attract bids following a sharp correction in oil prices.
US-Iran negotiations continue despite US defensive attacks on Iran
On Tuesday, Iran’s Islamic Revolutionary Guard Corps (IRGC) threatened retaliation after the US carried out strikes on southern Iran, which were described as “self-defense” by the US Central Command. The Iranian Foreign Ministry condemned the US attacks, calling them a “gross violation” of the ceasefire.
However, negotiations between the US and Iran regarding an end to the Middle East war and the reopening of the Strait of Hormuz, a vital passage to almost 20% of global energy supply, continue through mediators.
An Iranian official said on Tuesday that the unfreezing of Iran’s funds is the last serious sticking point with the United States (US) being resolved through Qatar mediation, Fars agency reported. However, there had been no official confirmation.
Earlier this week, US Secretary of State Marco Rubio said that the Strait of Hormuz has to be open “one way or the other,” and finalizing the deal with Iran may take a few days.
FIIs remained net sellers on Tuesday
There seems to be a mixed sentiment of Foreign Institutional Investors (FIIs) toward the Indian stock market the entire month. Overseas investors have been seen turning out net sellers on alternative days, with no clear pattern. On Tuesday, FIIs offloaded their stake worth Rs. 2,407.87 crore after increasing by Rs. 821.75 crore on Monday.
US Dollar wobbles ahead of US PCE Inflation data
The US Dollar trades in a tight range around 99.00 as investors await clear signals from the US and Iran regarding the progress in negotiations toward a permanent deal.
On the domestic front, investors await the US Personal Consumption Expenditure Price Index (PCE) data for April, which will be released on Thursday. Investors will pay close attention to the US PCE inflation data to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook.
The US core PCE inflation – which is the Fed’s preferred inflation gauge – is estimated to have grown at an annualized pace of 3.3%, faster than 3.2% in March, with monthly figures growing steadily by 0.3%.
Technical Analysis: USD/INR attracts bids near 20-day EMA
USD/INR trades slightly lower at around 95.70 as of writing. The pair holds a constructive bullish bias as spot remains above the 20-period Exponential Moving Average (EMA) at 95.4387.
The EMA’s upward slope hints that the recent advance is still supported, while the Relative Strength Index (RSI) near 56 suggests positive but not overbought momentum, allowing room for further gains if buyers stay in control.
On the downside, initial support is located at the 20-day EMA around 95.44, where a break would signal fading short-term momentum and expose a deeper corrective move towards 95.00. Looking up, the pair would attempt to return to the all-time high around 97.00 if it manages to recover above the May 22 high at 96.37.
AUD/NZD Price Forecast: Retreats below 1.2200 on hawkish RBNZ, weak Australian data
- AUD/NZD retreats from 1.2286 highs to levels below 1.2200.
- A hawkish RBNZ and soft Australian CPI figures are hammering the Aussie.
- The pair approaches the neckline of a Double Top pattern.
The Aussie Dollar (AUD) is dropping sharply against the New Zealand Dollar (NZD) on Wednesday. The pair has lost more than 0.8% so far today, hitting session lows at 1.2173, hammered by a combination of a hawkish hold by the Reserve Bank of New Zealand (RBNZ) and softer-than-expected Australian inflation figures.
The RBNZ left interest rates on hold, as widely expected earlier on Wednesday, but a split monetary policy committee hints at upcoming rate hikes. RBNZ Governor, Anna Breman, who used her casting vote to hold on Wednesday, affirmed that policymakers are concerned about second-round effects on inflation, and that further “OCR increases are likely at coming meetings.”
In Australia, April’s Consumer Prices Index (CPI) showed softer-than-expected inflationary pressures. These figures provide some leeway for the Reserve Bank of Australia (RBA) to wait and see for a clearer assessment of the consequences of the war in Iran, and have prompted investors to pare back hopes of an August rate hike.
Technical Indicator: A potential double top warns of a trend shift
AUD/NZD has lost more than 120 pips on Wednesday and is showing signs consistent with a trend shift. A bearish engulfing candle on the daily chart, and a potential double top at the 1.2285 area are clear indicators that bulls are giving up.
The 4-hour Relative Strength Index (RSI) has slipped to the mid-30s, hinting at persistent downside pressure. At the same time, the Moving Average Convergence Divergence (MACD) indicator has turned slightly negative, reinforcing the notion that sellers are taking control.
Immediate support is located at the 1.2125-1.2135 area, where May 7, 12, and 21 lows meet the neckline of the mentioned double top pattern. Further down, the April 9 and 14 lows, around 1.2045, would come into focus. The double top’s measured target is right below the 1.2000 psychological level. On the upside, in the unlikely case of a break above 1.2285, the 127.2% Fibonacci extension of the April-May rally lies at the 1.2380 area.
(The technical analysis of this story was written with the help of an AI tool.)
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.13% | -0.04% | 0.03% | 0.05% | 0.30% | -0.65% | -0.11% | |
| EUR | 0.13% | 0.09% | 0.15% | 0.17% | 0.39% | -0.52% | 0.01% | |
| GBP | 0.04% | -0.09% | 0.04% | 0.08% | 0.32% | -0.60% | -0.06% | |
| JPY | -0.03% | -0.15% | -0.04% | 0.02% | 0.25% | -0.67% | -0.12% | |
| CAD | -0.05% | -0.17% | -0.08% | -0.02% | 0.23% | -0.67% | -0.14% | |
| AUD | -0.30% | -0.39% | -0.32% | -0.25% | -0.23% | -0.90% | -0.35% | |
| NZD | 0.65% | 0.52% | 0.60% | 0.67% | 0.67% | 0.90% | 0.53% | |
| CHF | 0.11% | -0.01% | 0.06% | 0.12% | 0.14% | 0.35% | -0.53% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Offshore Yuan Returns to Over 3-Year High
The offshore yuan edged higher to around 6.78 per dollar on Wednesday, returning to its strongest level since February 2023, buoyed by encouraging domestic economic data. Industrial profits in China jumped 18.2% year-on-year in January–April 2026, supported by robust demand for Chinese electronics and elevated oil prices linked to Middle East tensions. The figures followed earlier signs of slowing economic momentum reflected in industrial output and retail sales data. Still, gains in the yuan were capped after the People’s Bank of China set the daily midpoint fixing at 6.8291 per dollar, 408 pips weaker than a Reuters estimate. The central bank has consistently guided the fixing below market expectations, a move widely interpreted as an effort to maintain currency stability and prevent excessive yuan appreciation.
Swiss Franc weakens as renewed US-Iran tensions support the US Dollar
- USD/CHF gains ground as geopolitical tensions in the Middle East keep the US Dollar supported.
- Iran warns it “will respond,” accusing the United States of violating the ceasefire in the Hormozgan region.
- Markets continue to price in higher-for-longer Federal Reserve expectations amid elevated Oil prices.
USD/CHF trades with a mild positive bias on Tuesday as renewed military escalation between the United States (US) and Iran supports the US Dollar (USD), pressuring the Swiss Franc (CHF). At the time of writing, the pair is trading around 0.7850, up 0.30% on the day and snapping a four-day losing streak.
American forces carried out “defensive strikes” in southern Iran on Monday, targeting missile facilities and Iranian boats allegedly attempting to deploy naval mines near the Strait of Hormuz. Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) claimed it had downed a US MQ-9 Reaper drone after it entered Iranian airspace.
In a statement shared by Iran’s IRIB broadcaster, Iran’s Foreign Ministry accused the United States of violating the ceasefire in the Hormozgan region and warned that Tehran “will respond and will not hesitate to defend itself.”
Despite the renewed military escalation, diplomatic efforts between Washington and Tehran continue. US Secretary of State Marco Rubio said on Tuesday that negotiations over a potential deal with Iran could “take a few days,” while stressing that the Strait of Hormuz “has to be open” and “will be open one way or another.”
The Strait of Hormuz remains largely closed, keeping a geopolitical risk premium embedded in global Oil prices and fueling inflation concerns worldwide. Inflation in the United States has accelerated sharply since the war began, reinforcing expectations that the Federal Reserve (Fed) may keep interest rates higher for longer, with traders increasingly pricing in the possibility of another rate hike by the end of the year.
In Switzerland, inflation rose to its highest level in 16 months in April, though it remains within the Swiss National Bank’s (SNB) 0%-2% target range. The SNB is expected to maintain its current policy stance, as the inflationary impact from higher Energy prices has been partly offset by the strength of the Swiss Franc, which helps make US Dollar-denominated commodities such as Oil cheaper in local currency terms.
Although SNB Vice Chairman Martin Schlegel said last week that the central bank maintains an “elevated willingness” to intervene in foreign exchange markets if necessary.
On the data front, traders will closely monitor the US Conference Board (CB) Consumer Confidence report later on Tuesday, followed by Switzerland’s ZEW Survey – Expectations data for May on Wednesday and the US Personal Consumption Expenditures (PCE) inflation report on Thursday.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.24% | 0.19% | 0.13% | 0.07% | 0.52% | 0.28% | |
| EUR | -0.09% | 0.19% | 0.11% | 0.07% | 0.01% | 0.46% | 0.20% | |
| GBP | -0.24% | -0.19% | -0.09% | -0.12% | -0.17% | 0.28% | 0.03% | |
| JPY | -0.19% | -0.11% | 0.09% | -0.05% | -0.09% | 0.33% | 0.12% | |
| CAD | -0.13% | -0.07% | 0.12% | 0.05% | -0.03% | 0.41% | 0.16% | |
| AUD | -0.07% | -0.01% | 0.17% | 0.09% | 0.03% | 0.44% | 0.19% | |
| NZD | -0.52% | -0.46% | -0.28% | -0.33% | -0.41% | -0.44% | -0.24% | |
| CHF | -0.28% | -0.20% | -0.03% | -0.12% | -0.16% | -0.19% | 0.24% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
New Zealand Dollar: Hawkish RBNZ stance supports against US Dollar – DBS
DBS Group Research economist Philip Wee expects the Reserve Bank of New Zealand (RBNZ) to deliver a hawkish hold, prioritising above-target inflation over weak GDP growth and high unemployment. He notes that OIS markets price a 51.5% chance of a July hike, while DBS does not rule out an early move at the May meeting, which could help lift NZD/USD back toward the upper half of its 0.57–0.61 trading range.
RBNZ stance underpins New Zealand Dollar
“The Reserve Bank of New Zealand is widely expected to deliver a hawkish hold during its monetary policy meeting on May 27.”
“However, the RBNZ is likely to prioritise above-target inflation over weak GDP growth and high unemployment.”
“Despite the consensus for the Official Cash Rate to stay unchanged at 2.25%, the OIS market is pricing a 51.5% chance of a 25-bps hike at the July 8 meeting.”
“We cannot rule out the RBNZ surprising with an “early” hike tomorrow.”
“Hence, NZD/USD has the potential to return to the upper half of this year’s trading range of 0.57-0.61, especially if the USD sheds its haven status amid any US-Iran deal to reopen the Strait of Hormuz.”
