Kiwi Gains As RBNZ Statement On Tightening Mortgage Lending Rules Receives Scrutiny

The kiwi has garnered strength in reaction to the aforementioned RBNZ statement, in which the Reserve Bank expressed intention to further tighten mortgage lending standards. Governor Orr's statement on the matter has drawn attention, as the official noted that the MPC "needs to think about when and how we would return interest rates to more normal levels, which are neither unnecessarily giving the economy a push forward nor holding it back," while the "next opportunity to publicly address this issue is the 18 August Monetary Policy Statement."

• Markets reacted by boosting OCR hike bets and the OIS strip now prices an ~80% chance of a 25bp hike at the Reserve Bank's August meeting, up from 65% seen yesterday. Tomorrow's labour market data can still materially affect positioning for the August MPS.
• NZD/USD last sits at $0.6989, 19 pips higher on the day, with the kiwi sitting atop the G10 pile. Familiar technical picture remains in play.
• AUD/NZD has shed 23 pips and last trades at NZ$1.0538, with bears looking for a deeper sell-off past the fresh cycle low printed yesterday at NZ$1.0508. Bulls would be pleased by a rebound above Jul 29 high of NZ$1.0618. Monetary policy outlook divergence has emerged as a one of the key drivers of the pair, with the RBA expected to walk back its tapering announcement today.
• AUD/JPY deals +20 pips at Y76.39, moving away from its 200-DMA at Y76.09. The next topside target is provided by Jul 29 high of Y76.89, followed by Jul 26 high of Y77.31. Meanwhile, a dip through the aforementioned 200-DMA would bring Jul 20 low of Y75.27 into view.