Risk-Off Feel Pulls Rug From Beneath NZD, Negating Post-CPI Bid

NZD posted a leg higher in the U.S./Asia crossover after a strong Q4 CPI report released out of NZ inspired the unwinding of RBNZ easing bets, with Kiwibank joining Westpac in backpedalling on their earlier calls for OCR reductions this year. Elsewhere, sizeable offers & firm cover ratios at the RBNZ's latest QE operation generated a tailwind for 10-Year NZGB yield, helping keep the kiwi afloat in early Asia-Pac trade. Focus then turned to the RBNZ's Q4 sectoral factor model inflation, which accelerated for the first time in a year, but the kiwi faltered nonetheless as light risk aversion crept in and rendered NZD the worst G10 performer. NZD/USD more than erased its post-CPI jump through the rest of the session, before establishing itself just shy of $0.7200.

• Headline flow focused on Covid-19 mitigation measures, including Hong Kong's decision to lock down part of the city and potential UK/French curbs on inbound international travel.
• AUD lost altitude alongside its Antipodean cousin, with a miss in Australian retail sales adding weight to the currency. AUD/USD snapped a three-day winning streak, but struggled to stage a clean break below prior intraday low.
• CAD & GBP also fell prey to broader risk aversion. USD/CAD advanced after charting a bullish Harami cross candlestick pattern yesterday, while cable pulled back from best levels since 2018.
• USD/JPY wavered within a tight Y103.49-61 range, ahead of the expiry of $1.0bn worth of options with strikes at Y103.40-50 at today's NY cut. Local news flow centred around rumours about potential cancellation of the Tokyo Olympics, with organisers to make the decision by end-March.
• The PBOC fixed USD/CNY at CNY6.4617, the banks liquidity injections matched withdrawals today despite repo rates creeping up. A stronger greenback has helped firm USD/CNH despite the lower fix. The fix was once again above sell side estimates, indicating the PBOC asymmetric response function.
• Focus turns to a slew of PMI surveys, U.S. existing home sales, UK & Canadian retail sales as well as ECB Survey of Professional Forecasters.