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FOREX: AUD/NZD North of Key Level on Dovish RBNZ

FOREX
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  • NZD is comfortably the poorest performer across G10 following the RBNZ rate decision overnight. The 50bps OCR rate cut was largely as expected, but council's commitment to rolling back restrictive policy should the economy warrant action has raised the likelihood of further easing this year -  with over 50bps now priced for the November decision.
  • As such, AUD/NZD has been marked sharply higher breaking above the Monday highs to hit the best levels since late July. A close at current or higher levels would also confirm a break above the 76.4% retracement for the downleg off the mid-year high at 1.1066.
  • The greenback trades firmer, with a wave of dollar demand coinciding with a soft European equity open. Concerns over Chinese stimulus should remain a key topic for the rest of the week - an announcement that the Chinese Ministry of Finance will hold a briefing on policy this Saturday failed to underpin sentiment. The CSI-300 closed lower by 7% after a late phase of selling pressure.
  • The Fed minutes release later today could shed further light on the decision to semi-surprise markets with a 50bp vs a 25bp cut to begin the easing cycle. It's to be expected that the discussion over the future rate path will revolve around a data-dependent/meeting-bymeeting approach, but the characterization of the decision to cut 50bp will be of note. Our full preview found here: https://mni.marketnews.com/481Unc5
  • Speakers of note Wednesday include Fed's Bostic, Logan, Goolsbee & Jefferson, with Collins & Daly after the close - covering a variety of issues. ECB's Villeroy is also set to appear in Paris at the London close.
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  • NZD is comfortably the poorest performer across G10 following the RBNZ rate decision overnight. The 50bps OCR rate cut was largely as expected, but council's commitment to rolling back restrictive policy should the economy warrant action has raised the likelihood of further easing this year -  with over 50bps now priced for the November decision.
  • As such, AUD/NZD has been marked sharply higher breaking above the Monday highs to hit the best levels since late July. A close at current or higher levels would also confirm a break above the 76.4% retracement for the downleg off the mid-year high at 1.1066.
  • The greenback trades firmer, with a wave of dollar demand coinciding with a soft European equity open. Concerns over Chinese stimulus should remain a key topic for the rest of the week - an announcement that the Chinese Ministry of Finance will hold a briefing on policy this Saturday failed to underpin sentiment. The CSI-300 closed lower by 7% after a late phase of selling pressure.
  • The Fed minutes release later today could shed further light on the decision to semi-surprise markets with a 50bp vs a 25bp cut to begin the easing cycle. It's to be expected that the discussion over the future rate path will revolve around a data-dependent/meeting-bymeeting approach, but the characterization of the decision to cut 50bp will be of note. Our full preview found here: https://mni.marketnews.com/481Unc5
  • Speakers of note Wednesday include Fed's Bostic, Logan, Goolsbee & Jefferson, with Collins & Daly after the close - covering a variety of issues. ECB's Villeroy is also set to appear in Paris at the London close.