RBNZ: Orr Notes considerably Less Impact From Reinsurer Flows this Time Around
Orr flags “considerably less” economic impact from reinsurer capital inflows vs. the ’11 earthquakes when it comes to the recent cyclone given underinsurance and less damage than was seen back in ’11.
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ECB: ECB To Raise Deposit Rate To 3.25% By Mid-Year (RTRS Poll)
The European Central Bank will be more aggressive than previously thought in its tightening campaign, adding another 50 basis points to its deposit rate on Feb. 2, as it continues its battle against rampant inflation, a Reuters poll found.
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NZD: Bullish Trend Intact, Consolidating Gains Above $0.64
NZD/USD is up ~5% from lows seen in early January. The pair has consolidated gains above $0.64, a level we had previously flagged earlier this month.
- The pair now looks for a close above $0.6468, the high from August 2022. Bulls have had several tests above this level last week, but have struggled to hold gains, however we are trading above this level today.
- A bullish technical trend remains in place, a close above current levels opens the Jan 18 high at $0.6530 and the 123.6% Fibonacci projection of the Oct-Dec rally at $0.6752.
- Bears look to break the 20-day EMA at $0.6378, a break through here opens the 200-day EMA at $0.6275.
- The 2 year NZ US Govt bond yield spread is a touch off levels seen last week as the spread continues to moderate after breaching +60bps in mid December. NZD/USD is outperforming relative yield spread trends over this period. The better tone to global equities is providing an offset though.
- The relative rates outlook remains mixed for both NZD and USD. OIS markets show NZ OCR peaking at ~5.4% in mid 2023, with ~35 bps of cuts priced in for H2 2023. Fed Funds Target Rate is priced to peak at ~4.9% in OIS markets with ~40bps of cuts priced in for H2 2023.
Source: Market News International (MNI)/Bloomberg
NZD: Firmer, Fills Opening Gap
NZD/USD prints at $0.6490/95, ~0.7% firmer from Monday's opening levels.
- The pair has firmed through this mornings session after gapping lower at the open, meeting resistance at $0.65.
- Incoming PM Hipkins indicating he will overhaul government policy may be aiding NZD at the margins.
- AUD/NZD found resistance at its 20-day EMA in early dealing and is down ~0.3% from opening levels. NZD/JPY prints at ¥83.85, as it looks to test the 200-day EMA at ¥83.95.
- Cross asset flows remain mixed, US equity futures are ~0.1% softer and BBDXY is also marginally lower.
- Wider swings in risk sentiment will be the main driver for NZD today.
