Hawkish RBNZ Sends Kiwi Flying, Risk-On Sentiment Takes Hold

RBNZ monetary policy decision sent the kiwi rallying across the board, as the Reserve Bank left its monetary policy settings unchanged and signalled that the tightening cycle is in sight. The reinstated OCR projection included in the Monetary Policy Statement suggested that the OCR could start rising in mid-2022, slightly earlier than most had expected. Meanwhile, the MPC dropped reference to being "prepared to lower the OCR if required" from its statement, while the summary of the meeting only mentioned that "the OCR is the preferred tool to respond to future economic developments in either direction".

• NZD/USD pierced the $0.7300 figure and attacked key resistance area at $0.7305/07, which represent May 10/Mar 2 highs. The rate managed to take out these levels and trades just above there at typing. NZD/JPY surged to its best levels since Apr 2018, after breaching its YtD peak. Key resistance levels gave way as NZD extended gains during RBNZ Gov Orr's press conference.
• The bid in NZD spilled over into AUD, which was the second best performer in the G10 pack, as well as into the broader commodity FX space. AUD/NZD slid sharply after the RBNZ's announcement and narrowed in on key support from Feb 26 low of NZ$1.0640.
• The PBOC set the central USD/CNY mid-point at CNY6.4099, just 2 pips shy of sell-side estimate. USD/CNH extended losses after the in-line fixing, printing worst levels since Jun 2018.
• Safe haven currencies came under additional pressure as e-minis crept higher. USD and JPY were comfortably the worst performers in G10 FX space.
• Focus turns to French sentiment gauges, Swedish unemployment as well as comments from Fed's Quarles, ECB's Villeroy & BoC's Lane.