Risk Sentiment In Driving Seat Ahead Of RBNZ Rate Decision

The kiwi dollar caught a bid Monday, riding the wave of broader risk-on impetus, as equity markets (ex-China) found poise after Friday's horrid Wall St. session. Gains for the NZD came amid positioning ahead of this week's RBNZ Monetary Policy Statement, with the MPC expected to raise the OCR by 50bp. NZD/USD topped out at $0.6492, just shy of the $0.6500 figure, associated with a notable (NZ$785.4mn) option expiry due at Tuesday's NY cut.

• The last two weeks have seen markets gain renewed confidence that the RBNZ will deliver its second consecutive 50bp rate hike on Wednesday. The OIS strip currently prices a 94% chance of such a scenario, also forecast by 19 out of 22 economists surveyed by Bloomberg.
• In the meantime, StatsNZ will publish quarterly retail sales data shortly. Analysts expect consumer spending to have been hit by the rapid spread of Omicron and unfolding "cost of living crisis." As a result, retail sales ex inflation are expected to have barely grown over the three months through end-March.
• NZD/USD changes hands at $0.6462, down 8 pips on the day, as U.S. e-minis trade on a heavier note (see our earlier EQUITIES bullet). Bears look for losses past May 18 low of $0.6291 towards May 12 low of $0.6217. Conversely, a rebound above May 5 high of $0.6568 would support the bullish case.