NZD/USD faltered much like the AUD in late Asia trading yesterday. The pair dipped to just under 0.6260 before support emerged. Note the 50-day MA comes in at 0.6262, while we currently track above 0.6280, with early session weakness in the NZD short-lived.
- After AUD, NZD was the worst performing G10 currency in the past 24 hours, losing 1% against the USD and generally underperforming on crosses. NZD/USD's post RBNZ bounce yesterday now seems a distance memory (just above 0.6380 was the high).
- RBNZ Governor Orr's testimony before parliament this morning didn't shed much fresh light on the outlook. The Governor stated that the domestic economy is in very good shape to withstand higher interest rates.
- The broad sell-side consensus is a further 50bps in tightening at the October meeting, which is line with market pricing (OIS currently tracking at +48bps). Beyond that, some analysts argue the pace of tightening could slow, although with the RBNZ forecast peak now above 4%, we will likely require clear evidence of slowing inflation/a weaker global backdrop for the RBNZ not to reach this level. OIS pricing for early 2023 sits above 4%.
- The domestic data calendar is empty today, with trade figures for July out tomorrow. Note we do have AU jobs data, which could influence sentiment in the AUD/NZD cross (last 1.1040/45).
- This is likely to leave NZD at the whim of offshore drivers. Onshore bond yields are tracking higher in early trade today but not the same degree as moves in core markets overnight. The 2yr NZ yield is +8bps to 3.51, the 10yr +12bp to 3.50%.