NZD buoyed by RBNZ’s hawkish surprise

Key Movers

The euro was the day's big mover giving up Tuesday’s extension beyond US$1.07 to hit intraday lows at US$1.0640. ECB officials continue to support President Lagarde’s plan to exit negative interest rates before the year's end however, mixed messaging from officials has raised questions as to what shape and form interest rate adjustments will take. The consensus appears to be a series of 25 basis point hikes in July and September, while some commentators are calling for a 50-basis point hike and others for a more measured and considered approach. With markets pricing 65 basis points of hikes into September, the overnight commentary did little to add support to the euro and with global forces and headwinds still plaguing the broader growth outlook markets appeared reluctant in extending gains. Having hit intraday lows the euro did find support on broader USD softness late in the overnight session. The FOMC minutes showed the Fed plans to move at pace toward neutral interest rates, all but guaranteeing a 50-point hike at the next two policy meetings before a potential pause and assessment of current conditions. The potential for a pause in the tightening cycle helped lift risk sentiment across equity markets and forced the USD lower across the board. The euro recovered to hit US$1.0690 while the British pound closed in on a break above US$1.26 and the Japanese yen staved off a break back above US$127.50.

Our attentions turn now to US jobless claims. With unemployment filings rising over the past 6 weeks we are keenly attuned to any further softening in the US labour market.