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FOREX: USD Bounce Drags EUR/USD Further Off Recovery High

FOREX
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  • The RBNZ rate decision spurred initial heavy selling in NZD, as markets responded to the 50bps rate cut to prompt a 0.5678 low in NZD/USD. The move proved short-lived, with the rally off lows coinciding with the RBNZ's signals that the OCR may only have limited room to fall further. As such, a short-covering bounce to 0.5732 has stuck, keeping the NZD the strongest performer in G10 headed into the NY crossover.
  • The single currency is the poorest performer so far, pressing EUR/USD back below 1.0450 and through yesterday's lows in the process. The move comes as part of the a broader bounce off lows for the USD Index in a move that looks idiosyncratic relative to broader market risk appetite: the EuroStoxx50 continues to plumb alltime highs.
  • UK inflation data came in ahead of expectations, however the details show little evidence that should push any MPC votes in either direction - with the upside surprises stemming from core goods and food prices - leaving UK rates markets primed for the next BoE cut at the June meeting.
  • Datapoints are few and far between Wednesday, with US housing starts and building permits the primary releases. This should leave markets with plenty of capacity to digest the FOMC minutes later today - at which traders will be on watch for the rationale behind the Fed's recent shift in statement language concerning inflation.
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  • The RBNZ rate decision spurred initial heavy selling in NZD, as markets responded to the 50bps rate cut to prompt a 0.5678 low in NZD/USD. The move proved short-lived, with the rally off lows coinciding with the RBNZ's signals that the OCR may only have limited room to fall further. As such, a short-covering bounce to 0.5732 has stuck, keeping the NZD the strongest performer in G10 headed into the NY crossover.
  • The single currency is the poorest performer so far, pressing EUR/USD back below 1.0450 and through yesterday's lows in the process. The move comes as part of the a broader bounce off lows for the USD Index in a move that looks idiosyncratic relative to broader market risk appetite: the EuroStoxx50 continues to plumb alltime highs.
  • UK inflation data came in ahead of expectations, however the details show little evidence that should push any MPC votes in either direction - with the upside surprises stemming from core goods and food prices - leaving UK rates markets primed for the next BoE cut at the June meeting.
  • Datapoints are few and far between Wednesday, with US housing starts and building permits the primary releases. This should leave markets with plenty of capacity to digest the FOMC minutes later today - at which traders will be on watch for the rationale behind the Fed's recent shift in statement language concerning inflation.