• NZD/USD rebounds modestly on Friday after falling to its lowest level in more than a week.
• Strong New Zealand inflation supports expectations of further Reserve Bank of New Zealand tightening.
• Geopolitical tensions and resilient US economic data continue to underpin the US Dollar ahead of next week's Fed meeting.

NZD/USD trades around 0.5790 on Friday at the time of writing, up 0.27% on the day as the pair recovers from a one-and-a-half-week low, although bullish momentum remains limited by the underlying strength of the US Dollar (USD).

The Greenback continues to draw support from rising geopolitical tensions in the Middle East after the United States (US) carried out another round of military strikes against Iran, while Iran and its allies responded with attacks targeting US-linked military assets across the region. Additional attacks on shipping routes in the Red Sea and the closure of the Strait of Hormuz have heightened concerns over global Oil supply disruptions, pushing energy prices higher and reviving inflation fears.

The prospect of higher energy-driven inflation reinforces expectations that the Federal Reserve (Fed) could keep monetary policy restrictive for longer and potentially deliver another interest rate hike before the end of the year. Thursday's Initial Jobless Claims data, which fell to 187K and significantly beat expectations, also highlighted the continued resilience of the US labor market, providing further support to the US Dollar.

At the same time, the New Zealand Dollar (NZD) finds support after stronger-than-expected inflation data reinforced expectations that the Reserve Bank of New Zealand (RBNZ) will continue tightening monetary policy, with markets still anticipating another rate increase at the September meeting.

Looking ahead, investors will focus on the preliminary S&P Global Purchasing Managers Index (PMI) data from the United States later on Friday. Beyond the headline figures, traders will closely monitor business sentiment and input price components for fresh clues on inflationary pressures ahead of next week's Federal Open Market Committee (FOMC) policy meeting, while NZD/USD is likely to remain driven primarily by broader US Dollar sentiment.