• NZD/USD rises as New Zealand's July ANZ Business Outlook Index surged to 56.1, its highest since February.
• Markets widely anticipate a 25-basis-point RBNZ interest rate hike at the September meeting.
• The US Dollar could find support as three policy members dissented in favor of a rate hike.

NZD/USD extends its gains for the third consecutive day, trading around 0.5810 during the Asian hours on Thursday. The currency pair climbs higher as the New Zealand Dollar (NZD) receives support from a sharp rise in domestic business confidence.

New Zealand's ANZ Business Outlook Index jumped to 56.1 in July, up significantly from 36.6 in the previous month to reach its highest level since February. This uptick was largely driven by easing international oil prices as geopolitical tensions in the Middle East began to subside.

Further underpinning the NZD's strength are hawkish expectations surrounding the Reserve Bank of New Zealand (RBNZ). Following last week's hot inflation report, markets are widely anticipating a 25-basis-point interest rate increase at the September meeting. Futures markets now price in rates reaching at least 3.0% by the end of the year, with a projected peak of 3.5% around mid-2027.

However, TD Securities stated that the recent escalation in regional tensions is increasingly disrupting critical energy shipping routes. Strategists highlight that “the return of Iranian-US strikes after a multi-day pause, along with continued Houthi risks for Saudi energy infrastructure, are keeping flows in both the Strait of Hormuz and Bab el-Mandeb heavily constrained,” underscoring the growing strain on global oil supply channels.

The upside for the NZD/USD pair could be limited, as the US Dollar (USD) may gain strength following a hawkish pause in interest rates by the Federal Reserve (Fed). Although the Fed kept rates steady in the 3.5%–3.75% range at its July policy meeting, an outcome widely anticipated by the markets, the decision revealed underlying hawkish sentiment.

Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed chief Neel Kashkari all dissented, advocating instead for a 25 basis point rate hike. Reinforcing this stance during the post-meeting press conference, Fed Chairman Kevin Warsh stated that while the central bank will not offer forward guidance on future rate paths, it remains committed to taking all necessary actions to achieve its 2% inflation target.

Fed holds rates but hawkish tone keeps Dollar supported

The Fed Monetary Policy Statement scores 7.4/10 on the FXS Speechtracker, a notably more hawkish tone relative to the historical average of 4.9/10. By holding the key overnight rate at 3.50-3.75% while stressing elevated inflation, solid economic activity, and strong productivity and investment, the Fed signals confidence in growth and a firm commitment to price stability, reinforced by the 9-3 vote where three regional presidents favored a hike. The emphasis on ample reserves and steady labor markets underlines a bias toward further tightening if inflation fails to converge convincingly toward the 2% goal, a backdrop that tends to underpin the Dollar.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 128.64, confirming that the overall policy stance remains firmly in hawkish territory. The combination of a high index level and a stronger-than-baseline speech score suggests that, despite no immediate rate move, the Fed continues to lean toward restrictive policy, a configuration that should keep Dollar bulls engaged while limiting upside for Euro and Yen in the near term.