RBA Silence Shields AUD From Negative Risk Tone, NZD Lags Behind

The NZD paced losses in G10 FX space as New Zealand reported 125 new community cases of Covid-19, while BBG trader sources pointed to NZD/USD sales by leveraged funds. NZD 2-year interest rate swap retreated, retracing some of its yesterday's advance.

• AUD knee-jerked higher as the RBA chose not to buy bonds in defence of its yield target. This resulted in revisions to RBA calls from some sell-side desks ahead of the Reserve Bank's imminent monetary policy meeting. ANZ expect the RBA to scrap their ACGB Apr '24 yield target next week, while NAB bought forward their projection of the first cash rate to mid-2023.
• Sales against its Antipodean cousin may have rubbed salt into the kiwi's wounds. AUD/NZD went bid, attacking the round figure of NZ$1.0500. The move coincided with a parallel move in AU/NZ 2-year swap spread.
• Broader risk tone was rather cautious, as underwhelming earnings reports from Amazon and Apple weighed on U.S. e-mini futures. JPY struggled to gain much strength nonetheless, with USD/JPY implied 1-week volatility hitting multi-month highs ahead of Japan's general election this Sunday.
• The European data docket today includes flash GDP & HICP data from the EZ and several Eurozone economies. In NY hours, focus will turn to U.S. PCE, personal income/spending, MNI Chicago PMI as well as Canadian GDP.