RBNZ fails to deliver, Riksbank boosts SEK

Chart: NZDUSD

NZDUSD backed up sharply overnight in sympathy with New Zealand rates at the front end of the curve doing likewise. It was no help to the NZD bears to have the backdrop of resurgent risk appetite and nearly parabolic gains in Chinese markets. Not expecting a significant follow through higher here for NZD.

The G10 rundown

USD – as we discuss above, the greenback has held in remarkably well despite the resurgent optimism in global markets and hopes for a US-China trade deal. Latest CPI data up today but the market is looking elewhere.

EUR – a weak backup in EURUSD despite the disappointment of the 1.1300 break not holding. We continue to focus lower on the weak EU growth outlook.

JPY – the yenis  running away to the downside in broad terms against other currencies on the ongoing meltup in risk appetite – would suspect that when this ends, the JPY is the highest beta trade on a shift back to more cautious sentiment. Interesting resistance approaching in USDJPY above 111.00 in the form of the 200-day moving average.

GBP – UK CPI up today, but not the chief focus here, as we await Brexit developments that many sources suggest may come painfully close to the March 29 deadline as Theresa May could use the time factor to achieve maximum leverage for a parliamentary vote on whatever she can agree with EU counterparts.

CHF – the franc is responding to the resurgence in risk appetite and weakening sharply yesterday – suddenly back near resistance and the 200-day moving average in EURCHF. USDCHF is also eyeing the last shreds of resistance into the 1.0100+ high of the cycle, the highest level since early 2017.

AUD – the Aussie is backing up a little in sympathy with the kiwi resurgence overnight, but we still prefer to look lower If the price action remains south of 0.7200. Next week’s Reserve Bank of Australia minutes could prove interesting if we are looking for a solid break below 0.7000.

CAD – USDCAD is retracing, but has a further work to do to reject the latest bullish reversal. Still, the resurgence in risk appetite and oil prices are making life uncomfortable for USDCAD bulls. A January home price index up later today out of Canada. 

NZD – this RBNZ meeting was one-off supportive and Governor Orr already has a chance tonight to spin the central bank’s decision in an appearance before a parliamentary committee. Our benchmark for the NZD relative strength is AUDNZD, where the outlook is lower if the move overnight sticks – still some range to work with towards parity.

SEK – Riksbank just out now – an interesting exercising in clapping its hands over its eyes and ears and insisting on a cautious normalisation schedule on the ongoing strength of the Swedish economy (despite massive red lights) while dropping the mandate for FX intervention. This is clearly kneejerk SEK supportive, but doesn’t tell us what Riksbank policy looks like if the eurozone tilts into recession and Sweden likewise, with a housing bubble already in full unwind.

NOK – EURNOK looks to be a sell again given the risk backdrop and resurgent oil prices as long as we remain below the spike highs from Monday. 

Upcoming Economic Calendar Highlights (all times GMT)

0930 – UK Jan. CPI
1000 – Sweden Riksbank’s Ingves Presser
1330 – Canada Jan. Home Price Index
1330 – US Jan. CPI
1530 – US Weekly Crude Oil / Product Inventories
1910 – New Zealand RBNZ’s Orr before parliament
2000 – New Zealand Jan. House Sales
2350 – Japan Q4 GDP
0001 – UK Jan. RICS House Price Balance