NZD Soars As Hot CPI Print Boosts OCR-Hike Bets, GBP Gains On Potential For BoE QT Delay

The kiwi dollar held the bulk of gains registered on the back of an expectation-busting consumer inflation report, while the fluctuation in risk appetite drove price action across the wider G10 FX space. In New Zealand data, headline inflation printed at +7.2% Y/Y, considerably above the median estimate (+6.5%) and RBNZ projection (+6.4%), supporting the case for continued aggressive monetary tightening from the RBNZ. The insights from the Stats NZ report were reinforced by the RBNZ's preferred metric of core inflation (sectoral factor model), which accelerated to an all-time high of +5.4% Y/Y.

• The addition of hawkish OCR-hike bets sees the OIS strip price ~70bp worth of tightening at the November meeting (+10.9bp on the day), while 2-Year swaps soared to levels last seen in 2008. This came alongside a flurry of hawkish revisions to sell-side views, as the choir of voices calling for a 75bp rate hike next month grew louder, while terminal rate estimates were reset higher.
• Initial risk-on flows were starting to moderate, when a leap higher in U.S. e-mini futures reinstated the positive tone. E-mini S&P 500 contract extended through last week's highs, clearing its 20-EMA in the process, which sent the BBDXY index to new session lows (1,337.57).
• Shortly thereafter, another round of greenback sales came on the back of an FT report noting that the BoE was likely to delay quantitative tightening in pursuit of greater stability in gilt markets. Cable spiked to fresh session highs, testing the $1.1400 figure, while the BBDXY sank to its lowest point since Oct 7 (1,336.69).
• Greenback weakness provided some reprieve to the yen, even as it was the second-worst G10 performer. Participants remained on intervention watch, as top officials stuck to their familiar script, with FinMin Suzuki noting that they "will be watching markets with a sense of urgency today."
• Focus turns to German ZEW survey, U.S. industrial output & Canadian housing starts. Speeches are due from Fed's Bostic & Kashkari, ECB's Makhlouf & Schnabel and Riksbank's Jansson.