NZD/USD, AUD/NZD, USD/CAD flows - RBNZ surprise hold, wary into BoC?

Bit of a juggling of the pack overnight after a big surprise split hold from the RBNZ – the market had been pretty assured of a hike going into the meeting, the Bank instead deciding to lean towards Fed-like comments on patience and time to hold off and judge.

The forecasts still leave a roughly 75% market priced probability of a hike at the next meeting, but this still knocks the assumed path behind the assumed ‘schedule’. The dovish surprise was to an extent offset by more hawkish commentary with Breman suggesting a higher path than previously forecast and noting did discuss whether could rise further than their OCR path, while also flagging the impact of a weak NZD.

Net result though has still been a natural NZD setback with NZD/USD spiking back down towards the mid Oct lows before settling on the 0.56~ base, while AUD/NZD sees a notable breakout to new highs through 1.25 towards 1.26. Higher still on the charts would see room to 1.2650 congestion then the 1.2682, 2013 year high.

The moves have the market a little more on-guard now heading into the N. American meetings. The Fed is seen on-hold, even with very good reasons to move, but the market is similarly strongly pre-priced towards a BoC hike, still up at around 80% probability, that seems far from guaranteed (we did see reasons for a hold). So the RBNZ and the spicy reaction could see USD/CAD tread more carefully into that decision now.