While there was some volatility, the forex markets are generally staying in last week's range as most pairs engage in consolidative trading. New Zealand Dollar firms up slightly today as markets view RBNZ's statement as a mild hawkish turn. Meanwhile, that is followed by rebound in the Japanese Yen as oil rout continues. WTI crude oil dived further to as low as 42.05 overnight and stays soft at around 42.5. The development dragged stocks and 30 year yield down as DOW lost -0.27% and S&P 500 dropped -0.06%. Canadian Dollar is also under some pressure with oil and will try to get some support from retail sales data to be released today.
Mild RBNZ hawkish turn
New Zealand Dollar strengthens broadly after RBNZ left the OCR unchanged at record low of 1.75% as widely expected. There are two main factors that are driving up the Kiwi. Firstly, RBNZ removed "developments since the February Monetary Policy Statement on balance are considered to be neutral for the stance of monetary policy." While the the central bank is still in general in a neutral stance, some traders perceive the removal of the sentence as a mild hawkish turn. Secondly, RBNZ noted the around 3% rise in trade-weighted exchange rate since May. And it attributed that increase as "partly in response to higher export prices". While it still noted that a lower NZD will "help rebalance the growth outlook towards the tradables sector", it's not too concerned with the rise in exchange rates.
AUD/NZD resume decline
AUD/NZD breaches last week's low of 1.0389 and reaches as low as 1.0379 before recovering mildly. Technically, the fall from 1.1017 is still in progress in spite of loss of downside momentum. Deeper decline is expected to 1.0234/0323 support zone in near term. This bearish case will be favored as long as 1.0549 resistance holds.
May to brief EU leaders on citizen rights
EU leaders will start a two-day meeting in Brussels today. This will be French president Emmanuel Macron's debut in the European Council Summit. Some attention will be on the impact of the new Frenco-German alliance. But the bigger focus would be on UK Prime Minister May, who's having her first EC Summit since the disastrous election. May is expected to brief the other 27 leaders on the principles of citizens' right regarding Brexit. This topic, along with the financial settlement and Ireland, are the top priorities in Brexit negotiation. And it involves 3.2 million EU citizens living in UK and 1.2 million Britons living in EU.
While Sterling was lifted by hawkish turn of BoE chief economist Andy Haldane overnight, there was no follow through buying. The markets are left confused by mixed messages. And there are still a lot of uncertainties regarding Brexit. Such picture is reflection of what's happening in the MPC. Sterling is still maintaining bearish outlook against Euro, Dollar and Yen.
GBP/CHF stays bearish
Indeed, the weakness of the rebound is also clearly seen in GBP/CHF. For the moment, outlook stays bearish with the cross kept well below near term resistance at 1.2537. We're holding on to the view that correction from 1.1635 has completed with three waves up to 1.3067. And break of 1.2213 would extend the larger down trend through this 1.1635 low.
Elsewhere...
Swiss will release trade balance in European session while UK will release CBI trends total orders. Canada retail sales will be a key focus in US session. US will release jobless claims, house price index and leading indicators.