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FOREX: NZD Slumps On RBNZ 50bps Cut, With Similar Moves Expected Going Forward

FOREX
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NZD weakness has been the theme of the Wednesday so far in the G10 space. This follows the 50bps cut by the RBNZ earlier, while the commentary pointed to similar moves going forward. The BBDXY USD index is marginally higher, last near 1240. The USD is slightly stronger against other currencies in the G10 space. 

  • NZD/USD tracks near 0.6080/85 in latest dealings, off around 0.90% versus end Tuesday levels in NY. We were closer to 0.6130/35 prior to the RBNZ announcement.
  • RBNZ-dated OIS softened by 6-10bps following today's RBNZ policy decision, with the central bank viewing policy as still restrictive. Our sense had been the market would react more if we saw a hawkish surprise today, but the RBNZ has arguably given the NZD bears fresh ammunition. Further weakness could see declines towards 0.6046 and 0.6000 (Aug 14 lows).
  • AUD/USD is also weaker, but only off by 0.25%, last under 0.6730. Further retracement in China and Hong Kong equities is likely weighing on sentiment (as well as an additional NZD headwind). The AUD/NZD cross is at 1.1055, just off session highs of 1.1076.
  • USD/JPY has been relatively range bound. The pair last near 148.30/35. Dips remain supported.
  • US equity futures sit lower, while US yields are slightly down at the front end.
  • Later the Fed’s Jefferson, Bostic, Logan, Goolsbee, Collins and Daly appear plus the September FOMC meeting minutes are published.
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NZD weakness has been the theme of the Wednesday so far in the G10 space. This follows the 50bps cut by the RBNZ earlier, while the commentary pointed to similar moves going forward. The BBDXY USD index is marginally higher, last near 1240. The USD is slightly stronger against other currencies in the G10 space. 

  • NZD/USD tracks near 0.6080/85 in latest dealings, off around 0.90% versus end Tuesday levels in NY. We were closer to 0.6130/35 prior to the RBNZ announcement.
  • RBNZ-dated OIS softened by 6-10bps following today's RBNZ policy decision, with the central bank viewing policy as still restrictive. Our sense had been the market would react more if we saw a hawkish surprise today, but the RBNZ has arguably given the NZD bears fresh ammunition. Further weakness could see declines towards 0.6046 and 0.6000 (Aug 14 lows).
  • AUD/USD is also weaker, but only off by 0.25%, last under 0.6730. Further retracement in China and Hong Kong equities is likely weighing on sentiment (as well as an additional NZD headwind). The AUD/NZD cross is at 1.1055, just off session highs of 1.1076.
  • USD/JPY has been relatively range bound. The pair last near 148.30/35. Dips remain supported.
  • US equity futures sit lower, while US yields are slightly down at the front end.
  • Later the Fed’s Jefferson, Bostic, Logan, Goolsbee, Collins and Daly appear plus the September FOMC meeting minutes are published.