Higher Equities Drives NZD Recovery

NZD/USD prints $0.5940 little changed from levels seen in late NY trading.

• NZD/USD recouped its early losses from yesterday, with a trough to peak intra day rally of ~1.7% after finding support at the 50-day EMA to deal at current levels.
• The USD was weaker across the board, which aided the Kiwi, although the currency lagged broader moves in the G10.
• With tonight's US midterms in focus, polls pointing to a split US Congress with Republicans controlling at least one chamber and limiting scope for further federal government stimulus is providing a potential catalyst for lower bond yields (although UST yields still finished higher overnight) and higher equity prices driving the USD selloff. Major indices were higher overnight (S&P500 ~+1%).
• OIS markets are now showing a terminal RBNZ rate of 5.33%, up 8 bps from levels seen in yesterday's dealing. The 2 year NZ-US government bond yield spread improved +8bps throughout yesterday’s session to deal ~-4bps.
• Despite the impressive intraday price action NZD/USD is still in a technical downtrend. Bears look to target the 50-day EMA at $0.5853, the 20-day EMA at $0.5793. Bulls target the 100-day EMA at $0.5853.
• This morning we have the 2yr inflation expectations on the wires. Otherwise, the focus will remain on broader risk appetite, particularly in relation to China covid developments and the US midterm elections.