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Kiwi volatility could ramp up around today’s RBNZ decision, even with the rate hike almost fully priced. Falling inflation expectations and softer-than-forecast economic data raise the risk that the Bank’s updated OCR track fails to match hawkish market pricing.
Australia’s latest inflation report was ugly enough to make mortgage holders feel sick, and traders have responded by rapidly ramping up RBA hike bets. The Aussie is now breaking key levels across the major crosses.
The Kiwi has gone quiet, but the RBNZ Survey of Expectations out soon may provide the catalyst traders have been waiting for.
Stronger employment wasn't enough to offset a surge in labour force participation, leaving unemployment at its highest level in more than a decade. The report keeps a September RBNZ hike in play but casts doubt on the rate path beyond.
The Aussie dollar has long been a way to express a view on emerging Asia. That may be changing as the region's currencies begin moving in the same direction against the US dollar.
The devil is in the detail. While the headline beat expectations, the underlying inflation story may be telling traders something very different.
The Kiwi topped the G10 FX leaderboard on Thursday as stronger economic data, narrowing Australia-New Zealand rate differentials and improving technicals aligned in its favour.
AUD/NZD and NZD/USD have reached key levels after delivering largely as anticipated over the past week. Australian GDP, oil prices and Fed pricing now look crucial for what comes next.
A sharp reversal in energy prices may have flipped the script for AUD/NZD, with a bearish key reversal suggesting the balance of risks is starting to tilt lower.
After 325 basis points of easing, the RBNZ has shifted to neutral guidance, effectively calling time on rate cuts. The Kiwi is surging as traders digest the implications.
The RBNZ faces another big call today with markets fully priced for a 25bp cut and a sliver of risk for more. Updated rate tracks and forecasts will set the tone, but technical signals suggest the Kiwi may be ready to turn higher.
NZD/USD has stopped responding to the indicators it normally tracks, leaving price action to do more of the heavy lifting in judging directional risks.
The cracks in New Zealand’s economy are widening. Unemployment is surging, youth disengagement is accelerating, and the RBNZ looks set to slash rates again. NZD/USD has broken down hard, while AUD/NZD is flying.
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