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NZD Plummets Following RBNZ, Greenback Remains On Front Foot

FOREX
  • NZD (-2.32%) remains the poorest performer in G10 on Wednesday following the RBNZ rate decision. The bank raised rates by 25bps - as expected - but unexpectedly signalled that their tightening cycle has now concluded, resulting in NZDUSD dropping below 0.6150 for the first time since April. Ongoing greenback strength throughout US hours prompted a further grind lower for NZDUSD, eventually printing a 0.6094 low, narrowing the gap substantially with the year’s lows at 0.6085.
  • Kiwi weakness dragged its antipodean counterpart lower, with AUD registering 1% losses, helped by the weakness for major global equity benchmarks.
  • UK markets drew focus across the European morning following the higher-than-expected CPI print for April. While headline CPI dipped to 8.7% from 10.1% prior - it was a far slower step-down for inflation pressure, and core also accelerated to 6.8% from 6.2%.
  • GBP's initial inflation-inspired rally faltered following the Gilt open, with markets returning to the previously observed pattern of selling the currency alongside notable increases in short-end rates. GBP/USD corrected off the high of 1.2470 down to an eventual session low of 1.2358 where spot closely resides as we approach the APAC crossover.
  • Japanese yen weakness has been consistent over the course of the US session as we approached the release of the FOMC minutes which showed a split FOMC over the need for continued rate hikes.
  • USDJPY extended gains above yesterday’s highs around 138.90 and then the 139 handle. Price action opens the next targets for the move which are 139.59, a Fibonacci retracement and eventually 140.62, the bull channel top drawn from the Jan 16 low.
  • Thursday’s data highlight will be the second read of US Q1 GDP, as well as jobless claims and pending home sales data. US Core PCE Price index data is scheduled for Friday.
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