Kiwi Shot Down By New Zealand's Salvo Against Housing Bubble

The kiwi fell prey to New Zealand gov't's bold plan for tackling the "dangerous" housing market bubble, with some steps due to take effect as soon as this weekend. NZD/USD pierced several key support levels, including its 100-DMA & Mar 5 low of $0.7100, as it slid smoothly towards worst levels since the final days of 2020. The rate printed a session low after punching through the $0.7100 mark, with some pointing to the execution of sell-stops upon the breach of that level, which triggered broad-based NZD sales.

• The suite of measures unveiled by PM Ardern included the removal of tax incentives for investors, an extension to the "bright-line" test (an effective capital gains tax on investment property), more accessible support for first home buyers, and NZ$3.8bn for new infrastructure around new housing developments.
• NZD weakness spilled over into AUD, with further headwinds emerging for the broader high-beta FX space as risk aversion took hold. A bout of risk-off flows was seen as German Cll'r Merkel & German regional leaders agreed to impose a radical five-day lockdown over Easter, but EUR remained relatively buoyant.
• AUD/NZD hit best levels sine early Oct, despite today's expiry of A$2.2bn worth of options (mostly AUD puts) with strikes at NZ$1.0785-90.
• JPY was the best G10 performer amid safe haven demand, while the DXY advanced but held yesterday's range.
• The PBOC fixed the USD/CNY mid-point at CNY6.5036, around 10 pips below sell side estimates. USD/CNH wobbled around neutral levels, as participants scrutinised a piece in China's financial press opined that the PBOC unlikely to tighten policy quickly.
• Focus turns to the House testimony from the Powell/Yellen duo, as well as comments from around a dozen G10 central bank members. The data docket features UK labour market report & U.S. new home sales.