- The NZD extends its gains on the week, rising as much as 0.62%.
- On Tuesday, the sell-off in global equities accelerated, while in the currency space, risk-sensitive currencies rose against safe-haven pairs.
- RBNZ: Money Market futures are priced at 100% chance of a 25bp rise, while the chance of a 50bp rise is 30%.
During the American session, the NZD gains against most of the G8 currencies, while safe haven pairs remain under pressure. At the time of writing, the NZD/USD trades at 0.6736, gains 0.63%.
Market participants are risk averse, reflected in losing US and European stock futures. In the FX complex, the story is different, with high beta currencies on the rise, led by the NZD, although contained within familiar levels.
Russia/Ukraine updates
Headlines in the Russia/Ukraine region seem to catch less attention from traders. On Monday, Russian President Vladimir Putin recognized two breakaway regions known as Donetsk and Luhansk as independent states. His decision was immediately followed by reactions from Western Europe and the United States.
US President Biden signed an executive order banning investment, trade and financing in the two breakaway regions of Ukraine. At the same time, US Secretary of State Blinken said a quick and strong response is required. In addition, the president of the European Commission, Von der Leyen, said that the Russian decision is a “flagrant violation of international law and the Minsk agreements”.
Geopolitical nerves aside, on February 23, the Reserve Bank of New Zealand (RBNZ) will hold its first monetary policy meeting of the year. Inflation data came in higher than the RBNZ estimated in the fourth quarter, coming in at 5.7% yoy, well above the central bank’s target band. That cements the continuation of the bank’s tightening cycle, but the question is, how far is the RBNZ willing to go? Money market futures traded at a 100% chance of a 25bp rise at the meeting, with a 30% chance of a 50bp rise.
New Zealand and US economic calendar.
Turning to the economic docket, New Zealand revealed that January credit card spending rose 5.5% annually, higher than the previous month. On the US front, Markit PMIs for February were released, with Manufacturing and Services beating estimates, the former at 57.5, higher than 56 forecast, while the latter at 56.7 versus 53 forecast.
Additional technical levels
Source: Fx Street
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