AUD/NZD, NZD/USD flows: Kiwi remains pressured into RBNZ
Kiwi remains pressured into RBNZ
Even with expectations of a hawkish outlook shift, mkt already has decent amount priced in
Cross continues to trade medium-term trajectory on charts and on 90s parallel
Loaded positioning remains its main n/t risk factor
NZD trading pretty heavily into the RBNZ overnight, AUD/NZD through the 1.2250 highs with 1.23~ figure and 2011 lows above, while NZD/USD also off within the recent tight range above 0.5815. It says a lot about current sentiment and pricing that what is widely expected to be a somewhat more 'hawkish hold' is offering little inhibition.
That is partly down to pricing, where the market already has over 100bp of tightening priced in by Mar-27, compared to just over 25bp in the last OCR projection, leaving plenty of room for an outlook adjustment that is well priced in. If a hawkish pivot is to make an impression it would perhaps have to be signalling around more aggressive imminent action - though even that would ask its own questions. Indeed, as with the ECB, it’s a live question now whether the market will continue to ‘reward’ lifts to relative tightening expectations, if they are seen as driven by upside inflation risks that is forcing policy reactions that intensify downside growth risks, rather than growth and risk market resilient (as more seen in the US).
AUD/NZD remains a medium-term chart breakout trade, with ‘late 90s’ parallels on top, if also a trade that is pretty well boarded on the spec side, as IMM data underscores. Positioning is that main near-term risk, but not while action remains trend-up.