We are long AUD/NZD heading into RBNZ meeting – RBC Capital Markets

Omkar Godbole FXStreet Contributor

The Global FX Strategy team at RBC says that the RBNZ could attempt jawboning the NZD through dovish comments… leading to a flatter yield curve. Hence, the team is bullish on the AUD/NZD cross ahead of the RBNZ rate decision.

Key points

NZD spiked on an increase in 2y inflation expectations to 1.92% (Q1 survey) from 1.68% (Q4 survey), although the bounce just unwound the drop in expectations of 2016, and expectations remain low by historical standards.

With the forward curve in NZ already mostly priced for a hike this year, we would fade this strength. The RBNZ meets on Thursday, and the main news it needs to take on board since its last meeting is a ~3% rise in the exchange rate (TWI basis).

We see significant risk that the central bank tries to talk the currency down either directly or indirectly through a dovish statement that flattens the forward curve, and we are long AUD/NZD heading into that meeting.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

GBP/USD strengthens to near 1.3400 as UK political risk fades

The GBP/USD pair gathers strength near 1.3395 during the Asian trading hours on Thursday, bolstered by fading domestic political uncertainty. However, hawkish minutes from the Federal Reserve and renewed tensions between the US and Iran might support the US Dollar and cap the upside for the major pair.

EUR/USD sticks to positive bias above 1.1400; Mideast tensions cap gains

The EUR/USD pair attracts some buyers for the second straight day, though it lacks follow-through and remains confined within the previous day's range during the Asian session on Thursday. Spot prices currently trade around the 1.1420 area, up less than 0.10% for the day, and remain at the mercy of the US Dollar price dynamics.

Gold sees more pain as Iran tensions revive inflation fears

Gold price reflects signs of softness on Thursday, trading 0.5% lower at around $4,056 during the Asian trading session. The precious metal is under pressure as Middle East hostilities have revived fears of high global inflation, a scenario that discourages major central banks from easing monetary conditions. This framework bodes well for interest-bearing assets, but diminishes the appeal of non-yielding assets, such as Gold.

Ripple and Stellar extend downside as weakening technicals

Ripple and Stellar extend losses on Thursday, correcting over 6% and 10%, respectively, so far this week. XRP falls below $1.090, while XLM posts a fifth consecutive day of correction and closes below key support levels.

2.50%: Why the Kiwi's first hike in three years is a wager on a number nobody can see

The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at 02:00 GMT on Wednesday, its first hike in three years and the moment the bank that cut deeper than any G10 peer last cycle turned to face the other way.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.