EUROPEAN FX UPDATE: Kiwi outflanks fellow G10s following hawkish RBNZ hike

Analysis details (10:19)

NZD/AUD

0.6200 continued to cap Nzd/Usd, but the Kiwi breached 1.0800 vs the Aussie clearly in wake of the RBNZ delivering what most expected and quite a bit more for good measure. To recap, the OCR was raised 75 bp and by the biggest single increment ever, while the Bank also deliberated hiking one full point and upgraded its peak rate forecast to 5.5% by the end of next year from 4.1% previously. All this in stark contrast to the RBA’s recent dovish shift and slowdown in the pace of tightening, to leave Aud/Usd more inclined to track developments elsewhere, and especially China’s increasingly tough battle to contain the latest Covid outbreaks, as the pair pivots 0.6650.

DXY/EUR/GBP

The Dollar and index extended their pullback, with the latter unable to secure another close above a pivotal Fib level yesterday and subsequently dipping back below 107.000 to a fresh 106.810 w-t-d low. Better than expected Eurozone and UK preliminary PMIs gave the Euro and Pound some traction on 1.0300 and 1.1900 respective handles, while Eur/Usd also had hefty option expiry interest to consider given 1.94 bn rolling off between 1.0300-10 at the NY cut. However, the DXY derived some support within a 106.810-107.210 range via relative weakness or underperformance in other basket components ahead of a raft of US data, the flash PMIs and FOMC minutes all compacted into the final full session pre-Thanksgiving.

CHF/JPY/CAD

All off best levels, but retained upward momentum against the Greenback after the Franc probed 0.9500, the Yen peered over 141.00 in holiday-thinned trade due to Japan’s Labour Thanksgiving Day and the Loonie scaled 1.3400 against the backdrop of ongoing strength in oil rather than comments from BoC’s Rogers (higher interest rates starting to work to slow the economy and tame inflation; risk of a trigger that may affect financial stability has risen as high household debt and elevated house prices are long-standing vulnerabilities).

SCANDI/EM

More fuel for the Nok as Brent retained a firm underlying bid and Norway’s credit indicator ticked up, while the Sek was underpinned on the eve of the Riksbank, perhaps on the prospect that it will match the RBNZ in terms of rate hike or even guidance. Elsewhere, the Pln took on board comments from the NBP (Kotecki said rates should increase further) and the Czk remarks from the CNB (strong Koruna should be a priority for the Bank and Government), while the Zar was caught between former than forecast SA CPI metrics and flat Gold, and the Cny/Cnh were plagued by more Chinese coronavirus cases and counteractive measures.

23 Nov 2022 - 10:19- Fixed IncomeData- Source: Newsquawk