Budget Day

Participants flocked into safe havens Wednesday, shying away from high-beta currencies such as the kiwi dollar. Growth concerns continued to simmer as global inflationary pressures call for tighter monetary policy, while China's keeps fighting multiple local flare-ups of COVID-19. NZD/USD sales accelerated in NY hours as U.S. equities had their worst day in nearly two years.

• NZD/USD implied volatilities jumped on Wednesday, with 1-week tenor extending gains this morning, ahead of next Wednesday's RBNZ monetary policy meeting.
• Spot NZD/USD trades at $0.6302, a touch higher on the day. From a technical perspective, gains above May 17/11 highs of $0.6376/80 are needed to signal the resumption of recovery from recent cycle lows. The next layer of resistance is at $0.6568, the high print of May 5. Key near-term support is located around $0.6232, which represents the 61.8% retracement of the 2020 - 2021 rally.
• FinMin Robertson is preparing to deliver Budget 2022 at 14:00 NZST/03:00 BST. It will be a difficult balancing act, as the Labour government intends to make good on its long-term spending pledges without adding too much fuel to the overheated economy. At the same time, Labour is under growing political pressure to address the costs of living crisis, an easy talking point for the Nationals.
• Reminder that New Zealand's quarterly PPI data will hit the wires shortly. Australia's monthly jobs market report, due later in the day, will be eyed in case it generates any trans-Tasman spillover.