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FOREX: Hong Kong Equity Surge Drives FX Risk On

FOREX
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Risk appetite has recovered in the FX space, aided by a further surge in Hong Kong equity markets, which have returned after yesterday's break.  NZD//USD is up close to 0.40%, while the A$ and NOK are both up 0.30%. Yen has underperformed, down 0.20%, steady trends have been evident elsewhere. 

  • Early focus was on the potential Israel response to the overnight missile launches from Iran. Further fighting has taken place in Lebanon, but Israel has not retaliated directly against Iran yet. Oil prices are up, but away from Tuesday intra-session highs.
  • So lack of fresh meaningful further escalation has likely been welcomed by the market. Returning Hong Kong equity markets have been the other positive for FX risk appetite. The main headline HSI is up 6%, with strong gains in China-related sub indices. Property gauges continue to surge as Beijing became the latest major city to ease home buying restrictions.
  • NZD/USD is back up to 0.6305, so 0.40% stronger for the session. A 50bps cut from the RBNZ next is rapidly becoming a consensus view, this hasn't weighed on NZD though. Market pricing for a 50bps cut is close to fully priced (around -44bps off implied OIS).
  • AUD/USD has lagged NZD gains slightly, but is still back above 0.6900 level, so still within striking distance of recent highs just above 0.6940.
  • Yen has lost ground, last near 143.80/25. Some selling interest in the pair appears above 144.00. Outside of the risk one tone from HK equities, commentary from new government officials has been in focus, with on-going caution around further BoJ rate hikes, including from new PM Ishiba. This looks to be in line with BoJ thinking.
  • Looking ahead, we have some ECB speak, EU unemployment figures, while in the US the ADP report will be in focus.   
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Risk appetite has recovered in the FX space, aided by a further surge in Hong Kong equity markets, which have returned after yesterday's break.  NZD//USD is up close to 0.40%, while the A$ and NOK are both up 0.30%. Yen has underperformed, down 0.20%, steady trends have been evident elsewhere. 

  • Early focus was on the potential Israel response to the overnight missile launches from Iran. Further fighting has taken place in Lebanon, but Israel has not retaliated directly against Iran yet. Oil prices are up, but away from Tuesday intra-session highs.
  • So lack of fresh meaningful further escalation has likely been welcomed by the market. Returning Hong Kong equity markets have been the other positive for FX risk appetite. The main headline HSI is up 6%, with strong gains in China-related sub indices. Property gauges continue to surge as Beijing became the latest major city to ease home buying restrictions.
  • NZD/USD is back up to 0.6305, so 0.40% stronger for the session. A 50bps cut from the RBNZ next is rapidly becoming a consensus view, this hasn't weighed on NZD though. Market pricing for a 50bps cut is close to fully priced (around -44bps off implied OIS).
  • AUD/USD has lagged NZD gains slightly, but is still back above 0.6900 level, so still within striking distance of recent highs just above 0.6940.
  • Yen has lost ground, last near 143.80/25. Some selling interest in the pair appears above 144.00. Outside of the risk one tone from HK equities, commentary from new government officials has been in focus, with on-going caution around further BoJ rate hikes, including from new PM Ishiba. This looks to be in line with BoJ thinking.
  • Looking ahead, we have some ECB speak, EU unemployment figures, while in the US the ADP report will be in focus.