FOREX: NZDUSD Prints Four-Month Lows Following Dovish RBNZ Cut
Aug-20 10:22
- The New Zealand dollar has been under significant pressure Wednesday, after the RBNZ committee voted to reduce the OCR by 25bps to 3.00%. There were two votes for a larger 50bp interest rate cut, representing the most fractious vote split in the MPC’s history. The dovish tilt saw NZGBs close 10-16bp richer, with OIS pricing down 14-23bp across future meetings, and 35bp of further easing priced by November.
- Kiwi weakness had been notable ahead of the decision, largely reflective of the weakness for the major equity benchmarks. NZDUSD recorded its first print below 0.5900 in two weeks, and the subsequent extension south has seen the pair trade down to a four-month low at 0.5815.
- Exponential moving average studies have moved into a bear-mode position and today’s move through the May lows bolsters the short-term bearish momentum. The 50% and 61.8% retracements of the April-July price swing are the next notable support levels, located at 0.5803 and 0.5728 respectively.
- In the crosses, AUDNZD has broken a number of daily highs just below the psychological 1.10 mark, rising to an intra-day high of 1.1069 and the highest level since early March. Further strength would place the focus back on key medium-term resistance between 1.1175/80.
- Following the upside surprise for UK inflation data, GBPNZD has surged 1.2%, briefly extending the bounce from the July lows to 4.25%. Price action for the cross has significantly narrowed the gap to the blowout highs from April this year, located around 2.3350. Downtrend resistance from the 2015 highs comes in just below this level.
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STIR: Fed Rates Cool With Trade Policy In Focus
Jul-21 10:21
- Fed Funds implied rates are up to 1bp lower overnight for 2025 meetings, seemingly stemming from a WSJ report reiterating stances seen last week that the EU is preparing to pushback more firmly against US trade measures.
- Cumulative cuts from 4.33% effective: 1bp Jul, 17bp Sep, 30bp Oct, 46.5bp Dec, 57.5bp Jan and 72.5bp Mar.
- The near-term path remains within last week’s range though, primarily driven by some hawkish CPI details before Trump-Powell headlines notably built on a dovish PPI report.
- Rates see larger rallies further out the curve as weaker growth prospects weigh.
- That’s demonstrated by the SOFR implied terminal yield dropping 4bps from Friday’s close for 3.145%, tilting a little closer to five rather than four cuts for the cycle from current levels.
- The FOMC has entered its media blackout ahead of the Jul 29-30 meeting.
US TSY FUTURES: CFTC Shows Asset Managers Trimming Long, Funds Trimming Short
Jul-21 10:07
The latest CFTC CoT report pointed to cover of existing positions across the major investor cohorts (in curve-wide terms) that we track during the week ending July 15.
- Asset managers trimmed net longs in all contracts outside of TU futures (where they extended their net long), reducing their net long exposure by a little over $13mln DV01, albeit remaining net long across the curve.
- Leveraged funds also trimmed net shorts in most contracts (only extending net shorts in TU & US futures), reducing exposure by ~$4.5mln DV01, but remaining net short across the curve.
- Broader non-commercial net positioning saw net shorts added to in the wings (TU, US & WN), while net shorts were trimmed in the belly & intermediates (FV, TY & UXY), with the cohort remaining net short across the curve.
Source: MNI - Market News/CFTC/Bloomberg Finance L.P.
LOOK AHEAD: US Leading Index and T-Bills
Jul-21 10:02
US Data/Speaker Calendar (prior, estimate). All times ET
- Jul-21 1000 Leading Index (-0.1%, -0.3%)
- Jul-21 1130 US Tsy $82B 13W, $73B 26W bill auctions
- FOMC now in media blackout
Source: Bloomberg Finance L.P. / MNI
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