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(M2) Correction Extends

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Late Session Rebound

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(M2) Corrective Cycle Remains In Play

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(M2) Gains Still Considered Corrective

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NZD

The greenback fell on Monday in holiday thinned trade which saw NZD/USD push higher, the pair ran into resistance at 0.7284 before pulling back slightly into the close. The pair last up 11 pips at 0.7280.

  • CBA points to comments by the RBNZ chief economist as rationale for the slight pullback into the close: "Young Ha indicated the central bank could buy government bonds to replace maturing bonds, thereby keeping the RBNZ's balance sheet stable, after the RBNZ ends its large‑scale asset purchase program in June 2022. It is quite normal for central banks to stabilise the size of their balance sheet for a period after they end their bond buying program. We see no implications for NZD in Ha's comments."
  • Also worth mentioning comments from RBNZ Assistant Governor Hawkesby late in the session yesterday. He said neutral OCR was around 2%, adding the bank doesn't need to see spare capacity being used up before tightening. He also said the bank doesn't need the LSAP to end before a hike. Hawkesby addressed the market reaction following last week's RBNZ decision, he said there was "an awareness that through the passage of time the conditionality of our projections would sink in, that people would understand that we are back in the old world where they are conditional on a whole lot of assumptions."
  • Elsewhere, data showed New Zealand April home building approvals rose 4.8% M/M from a revised 19.2% rise in March. There are no other releases on the economic docket today.

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