USD Index Steady, NZD Surges On Hawkish RBNZ Hold Before Trimming Gains

The BBDXY is little changed in the first part of Wednesday dealings, last around 1247.55. This has masked noticeable outperformance from the NZD, post a hawkish hold from the RBNZ.

• The RBNZ revised the OCR track higher, along with the inflation outlook. We have seen a sharp rise in NZGB yields as a result (5-8bps, led by the front end).
• NZD/USD got to highs of 0.6152 but we sit back around 0.6120/25 in recent dealings, still +0.50% firmer for the session. RBNZ Chief Economist Conway pushed back against market pricing of a Dec hike at the press conference. Still, Governor Orr noted raising rates at this meeting was a real consideration.
• Upside focus for NZD is likely to rest at 0.6200/20 (round number, March 8 High). Note the 200-day EMA is back near 0.6075.
• AUD/USD has been relatively steady, dragged higher by NZD but now back to flat at 0.6665. The AUD/NZD cross got to lows of 1.0861 (close to the 100-day EMA at 1.0857), but we sit slightly higher now, around 1.0880/85.
• Trends have been relatively quiet elsewhere. USD/JPY has drifted higher but remains within Wednesday ranges. We were last 156.30/35.
• In the cross asset space, US trends have been very steady in terms of equity futures and yields.
• Looking ahead, Wednesday’s calendar is highlighted by UK inflation data and the FOMC minutes of the May meeting.