New Zealand Returns From Long Weekend

NZD/USD see-sawed Monday amid holiday-thinned liquidity, as New Zealand markets were shut. The rate pulled back from intraday highs into Europe as the USD gained across the board after German Ifo Business Confidence Index dropped to a six-month low. Firmer risk appetite allowed NZD/USD to recoup those losses and finish the day marginally higher.

• Kiwibank have updated their RBNZ call and now expect the tightening cycle to include two more 25bp OCR hikes, "taking the cash rate to 2% by November next year." The revision was justified by Kiwibank's view that the surge in inflation will persist. As a reminder, the RBNZ see 2% as a neutral level of the OCR.
• Elsewhere, Fonterra have raised and narrowed their milk price forecast range to NZ$7.90-8.90/kg from NZ$7.25-8.75kg. The implied mid-point has therefore been lifted to NZ$8.40/kg from NZ$8.00, matching the highest payout on record from 2014.
• Looking ahead, New Zealand's trade balance & final ANZ Business Confidence are due tomorrow, while ANZ Consumer Confidence will be published on Friday.
• NZD/USD last changes hands at $0.7162, virtually unchanged on the day. Bulls need a clearance of Oct 21 high of $0.7219 before taking aim at channel top/Jun 7 high of $0.7240/43. Bears see the 200-DMA at $0.7102 as their initial target.