Talking Points:
- NZ Dollar sinks as RBNZ pours cold water on rate hike outlook
- Yen gains, Aussie and Loonie rise as risk appetite firms in Asia
- US Dollar may fall if Fed officials’ hawkish conviction wavers
The New Zealand Dollar slumped in overnight trade following the RBNZ monetary policy announcement, as expected. A cautious policy statement released alongside the decision to keep the cash rate steady at 1.75 percent poured cold water on tightening bets.
Governor Graeme Wheeler predicted that policy “will remain accommodative for a considerable period,” citing an uncertain in the international outlook. He added that“policy may need to adjust accordingly,” which might even have been meant to hint at an easing bias.
The Kiwi fell alongside front-end local bond yields, reinforcing the sense that traders interpreted the statement as broadly dovish. Markets priced in at least one hike over the coming 12 months ahead of the RBNZ announcement. OIS rates afterward suggest investors are no longer convinced.
The Japanese Yen likewise traded lower as most Asian stocks advanced, pressuring the standby anti-risk currency. The risk-on mood likewise offered support to the sentiment-sensitive Australian and Canadian Dollars.
The British Pound jumped higher late into the Asian session, erasing losses suffered earlier in the day to post meaningful gains versus all of the G10 FX majors. The move occurred as Gilt rates gapped sharply higher as UK bond trading reopened for the day, offering the currency a bit of yield-based support.
A lackluster offering of economic data puts Fed-speak at the forefront from here. James Bullard and Charles Evans – Presidents of the US central bank’s St. Louis and Chicago branches, respectively – are due to speak. A sense that fiscal policy uncertainty has officials wavering on rate hikes may hurt the US Dollar.
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Asia Session
European Session
** All times listed in GMT. See the full DailyFX economic calendar here.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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