Europe Summary and Highlights 27 May
Some corrective action on the popular crosses
AUD/NZD extends the corrective pullback out of the RBNZ
NOK/SEK adjusting as the lower Brent prices stick even with the strains
European morning session
Morning action mainly focused on some position adjustments on the popular cross trades, taking its cue both from overnight action and from the (so far) stickiness of the pullback in oil prices.
Out of the RBNZ, AUD/NZD extended the pullback back to 1.2135/15 recent lows support, which stands in the way of stronger 1.2050/00 support area. While the RBNZ in one sense only adjusted its OCR projection to nearer market existing expectations, the cross is a well populated trade that had run up even further into the meeting. Along with the oil pullback, that gave a good positional cue to some pullback action.
It’s a similar story for NOK, the other main mover of the morning, NOK/SEK around – ¾ %, and EUR/NOK + ½ %. NOK has been another popular thematic cross trade and with Brent holding onto the lower levels as talks continue despite all the recent concerns and strains on the deal talks (Brent front month -3.5% to $96~), that’s encouraging in some near-term profit-taking interest. NOK/SEK back below its recent MA trend and 1~ figure also helping the move, 0.9950~ lows, ahead of 0.99 and 0.9860/00.
EUR/USD +0.15%, finding the 1.1640/50 area magnetic ahead of expiries.
Asia Session
The RBNZ kept rates unchanged at 2.25% in the May meeting but on a hawkish 4-3 vote. Governor Breman broke the tie to keep rates at 2.25%. The OCR path is revised significantly higher from February forecast, around 2 hikes higher by year end 2026. They still see inflation returning to target range in mid 2027 but expecting above 4% in 2026. NZD/USD jumped and stay 0.68% higher at 0.5876.
Australian Headline April y/y CPI moderates to 4.2% from 4.6% but RBA preferred trim mean y/y CPI rose to 3.4% from 3.3%. It continues to point towards strong inflationary pressure but not enough to persuade the RBA to hike the 4th time in a row. Without strong support from the indecisive risk mood, AUD/USD is trading 0.14% lower at 0.7157. There hasn't been much progress in Middle East but optimism is driving oil lower. Else, EUR/USD is up 0.1%, GBP/USD and USD/JPY up 0.03% while USD/CAD unchanged for the session.