- The NZD extends its gains this week – so far up 0.62%.
- On Tuesday, the global equities sell-off accelerated, while in the FX space, risk-sensitive currencies rose vs. safe-haven peers.
- RBNZ: Money market futures have priced in a 100% chance of a 25 bps increase, while odds of a 50 bps lie at 30%.
During the North American session, the New Zealand dollar gains against most G8 currencies, while safe-haven peers stay under pressure. At the time of writing, the NZD/USD is trading at 0.6736, after gains of 0.63%.
Market participants are risk-off, portrayed by European and US equity futures recording losses. In the FX complex it is a different story, with the high-beta currencies up, led by the NZD, although contained within familiar levels.
Russia/Ukraine updates
Headlines in the Russian/Ukraine region appear to be grabing less of traders’ attention. On Monday, Russian President Vladimir Putin recognized two separatist regions known as Donetsk and Luhansk as independent states. His decision was immediately met with condemnation by Western Europe and the US.
US President Biden signed an executive order banning investment, trade, and financing to the two Ukraine separatist regions. At the same time, the US Secretary of State Blinken said that it requires a swift and firm response. Also, the European Commission President Von der Leyen said that the Russian decision is a “blatant violation of international law and the Minsk agreements.”
That said, the UK and the Eurozone have imposed sanctions on Russia. Read more here:
- UK PM Johnson: Sanctioning 5 Russian banks, three individuals, only first tranche of what UK willing to do
- EU will hit three Russian banks with an asset freeze and lock them out of EU markets - WSJ
Putting geopolitical jitters aside, on February 23, the Reserve Bank of New Zealand (RBNZ) will host its first monetary policy meeting of the year. Inflation data came in hotter than the RBNZ estimated in Q4, printing 5.7% y/y – well above the central bank target band. That cements a continuation of the bank’s tightening cycle, but the question is, how far are the RBNZ willing to go? Money market futures priced in a 100% chance of a 25 bps increase at the meeting, with a 30% chance of a 50 bps hike.
NZ and US economic docket
Regarding the economic docket, New Zealand revealed that Credit Card Spending for January, rose to 5.5% y/y, which was higher than the previous month. On the US front, Markit PMIs for February featured, with Manufacturing and Services beating estimates, the former at 57.5, higher than the 56 foreseen, while the latter at 56.7 vs 53 expected.
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