NZD/USD drops below 0.6170 amid escalating geopolitical tensions, firmer US Dollar

• NZD/USD trades in negative territory for two straight days, losing 0.46% on the day.
• The concern about ongoing geopolitical tension lifts the US dollar and exerts some selling pressure on the Kiwi.
• New Zealand NZIER Business Confidence for Q4 arrived at -2.0% vs. -52% prior.
• Investors await the US NY Empire State Manufacturing Index for January, due on Tuesday.

The NZD/USD pair drops to near 0.6160 during the early European trading hours on Tuesday. The downtick of the pair is driven by the stronger US Dollar (USD) amid the risk-off environment and the rising Middle East tension. Meanwhile, the US Dollar Index (DXY) rises to a multi-week high near 102.90.

The escalating geopolitical tensions in the Middle East dominate the market sentiment on Tuesday. According to a statement released by Iranian state media, Iran’s Islamic Revolutionary Guard Corps (IRGC) fired missiles at targets in northern Iraq. The report stated that the ballistic missile was struck near the US Consulate in Erbil, Iraq. That being said, the fear of uncertainty and geopolitical tension could boost safe-haven assets like the Greenback and weigh on riskier assets like the New Zealand Dollar (NZD).

On the Kiwi front, the New Zealand NZIER Business Confidence for the fourth quarter came in at -2.0%, significantly improved from the previous quarter's of -52%, according to the New Zealand Institute of Economic Research (NZIER) on Tuesday. However, the figure failed to lift the Kiwi as traders turned to a cautious mood.

The US NY Empire State Manufacturing Index for January will be released later on Tuesday. On Wednesday, the Chinese economic data, including Q4 Gross Domestic Product (GDP), Industrial Production, and Retail Sales will be a closely watched event. Also, the US Retail Sales will be due on Wednesday. On Friday, the New Zealand Business PMI report will be published. These figures could give a clear direction to the NZD/USD pair.