Heavy Start

The Fed's monetary policy decision/statement inspired some greenback-driven volatility in NZD/USD Wednesday, as Chair Powell signalled potential for tapering asset purchases as soon as in Nov and said that tapering could end around mid-2022. The rate spiked higher in the initial reaction, rejected resistance from the prior day's high and retreated amid broad-based demand for the greenback seen as Powell's presser got underway. Meanwhile, some relatively optimistic musings surrounding Evergrande's troubles aided risk appetite, providing a degree of support to NZD/USD through the day.

• The rate has ebbed lower this morning, it is hard to pin this downtick on any local headlines, while the AUD also trades on a softer footing. NZD/USD last sits -14 pips at $0.6996 and a clean break below $0.6993/88, which represent yesterday's low/50% retracement of the Aug - Sep rally, would shift focus to Aug 27 low of $0.6933. Bulls look for a push through the aforementioned $0.7056 level, which would expose the 100-DMA at $0.7067.
• The RBNZ confirmed that it will "proceed with its proposal to tighten Loan-to-Value Ratio (LVR) restrictions on lending to owner-occupiers to reduce risky mortgage lending" and from November "will be restricting the amount of lending banks can do above an LVR of 80 percent to 10 percent of all new loans to owner-occupiers, down from 20 percent at present."
• UK PM Johnson pushed back against rumours that New Zealand could be asked to leave the Five Eyes intelligence sharing alliance after the formation of the AUCUS pact. He noted that New Zealand was not included in the new pact owing to its long-standing opposition to nuclear technology.
• Participants look ahead to the release of New Zealand's monthly trade data tomorrow.