Kiwi Bounces After RBNZ Decision, Sterling Gains On UK Reopening Plans

Kiwi dipped in the immediate wake of the RBNZ's monetary policy announcement but hit support at $0.7315 (a former breakout level/Jan 6 high) and swung back with renewed impetus just minutes thereafter, as participants digested the Reserve Bank's rhetoric. New Zealand's central bank left its main MonPol settings unchanged, while stressing that it remains ready to add stimulus if needed, amid uneven recovery and persistent uncertainties. It upgraded the economic projections but refrained from publishing the forecast for the OCR beyond the current quarter. The kiwi is the best G10 performer alongside GBP as we type. NZD/USD implied volatilities fell across the curve with the event risk behind.

• Sterling was on a tear amid continued enthusiasm about the UK's plans for gradually unwinding Covid-19 restrictions over the coming months. The bid in sterling was accompanied by the usual stops and thinner liquidity lines being thrown around by participants. EUR/GBP extended its losing streak to nine days hitting worst levels in a year, while cable had a look above $1.4200.
• Safe havens JPY & CHF comfortably underperformed their G10 peers despite a poor showing from most regional equity benchmarks. USD/JPY crept higher with $3.2bn worth of options with strikes at Y105.65-80 due to roll off at the NY cut.
• The PBOC fixed its USD/CNY mid-point at CNY6.4615, 10 pips above sell side estimates. The bank injected CNY 10bn via reverse repos, another small injection by historical standards. USD/CNH slipped initially, but recouped losses.
• The data docket is fairly light today, with final German GDP & U.S new home sales coming up. Central bank speaker slate includes Fed's Powell, Clarida & Brainard as well as BoE's Bailey, Broadbent, Vlieghe, Haskel & Haldane.