SocGen’s Kit Juckes probably summed up the overnight session best:
Overnight currency drivers have been a pretty eclectic collection of unrelated developments.
That sounds like it could be an ill-advised sequel to “A Series Of Unfortunate Events“: “A Pretty Eclectic Collection Of Unrelated Developments.”
First there’s the kiwi which collapsed.
That comes courtesy of the RBNZ which, while keeping rates on hold, came across as pretty goddamn dovish in the statement, saying policy will remain accommodative going forward. That sent the longs to liquidating and NZDUSD dropped through multiple supports as traders priced the spot lower in reaction to the retained easing bias.
And then there was this:
- RBNZ’S WHEELER DOESN’T SEE ACCELERATING INFLATION PRESSURES
- RBNZ SEES AS MUCH CHANCE OF RATE CUT AS HIKE, MCDERMOTT SAYS
And then some more:
- RBNZ’S MCDERMOTT SAYS MARKETS ARE IGNORING DOWNSIDE RISKS
You get the idea.
Swaps plunged and ultimately, the Kiwi fell to an 11-month low and was, to quote one Bloomberg strategist, “left feeling sad and lonely.”
“I’m surprised the NZD fell as much as it did on the back of the RBNZ announcement, which has seen the market cut the odds of a 2017 rate hike from 35% to 20%,” the above-mentioned Kit Juckes wrote this morning, adding that “it says something about the shift in the market mood though, that a ‘dovish hold’ is a big event.” Good point.
“Markets are looking for rates to go up, generally,” Juckes continues, noting that “still, NZ$ 10yr yields are down 4 1/2bp on the day, 30bp so far this year, which is comfortably the biggest G10 fall. That leaves NZXD vulnerable to further weakness generally and within the NZD, AUD, CAD block.”
Sorry I had to do this to you Robin, but you walked right into it…
Or, in other word(s):
Anyway, the kiwi wasn’t completely “sad and lonely.” There was also the loonie, which fell after Moody’s cut Canadian banks euphemistically citing “a more challenging operating environment.”
- SIX CANADIAN BANKS CUT BY MOODY’S ON CHALLENGING ENVIRONMENT
Basically that negated the bump the loonie got from bullish EIA data out of the US:
Here are the 6 banks:
- Toronto-Dominion Bank to Aa2; outlook negative
- Bank of Montreal to A1; outlook negative
- Bank of Nova Scotia to A1; outlook negative
- Canadian Imperial Bank to A1; outlook negative
- National Bank of Canada to A1; outlook negative
- Royal Bank of Canada to A1; outlook negative
As our friend Kevin Muir the Macro Tourist reminded you earlier this week, the “cool” thing to do now is short the loonie:
So that’s all a lot of fun.
Elsewhere, there’s the pound which sank after the BOE voted 7-1 to hold rates:
Apparently, speculation that the vote would be 6-2 had some folks putting on bullish bets. That’s how silly this has gotten in terms of central bank watching.
Here’s the bullet point summary via Bloomberg:
- Bank of England says monetary policy may need to be tightened “by a somewhat greater extent over the forecast period than the very gently rising path implied by the market curve underlying the May projections”
- Rate outlook depends on economy performing as expected
- BOE outlook assumes ‘smooth’ Brexit
- BOE publishes quarterly Inflation Report, cuts 2017 GDP forecast to 1.9% v 2%, raises 2018 to 1.7%, 2019 to 1.8%
- BOE raises 2017 CPI forecast to 2.7%, sees rate at 2.8% in 4Q
- BOE sees inflation at 2.2% in 2 yrs, 2.3% in 3 yrs
Elsewhere Asian markets were higher as South Korean shares rebounded. Europe is mixed.
- Nikkei up 0.3% to 19,961.55
- Topix up 0.1% to 1,586.86
- Hang Seng Index up 0.4% to 25,125.55
- Shanghai Composite up 0.3% to 3,061.50
- Sensex up 0.2% to 30,306.64
- Australia S&P/ASX 200 up 0.05% to 5,878.34
- Kospi up 1.2% to 2,296.37
- FTSE 7391.92 6.68 0.09%
- DAX 12758.49 1.03 0.01%
- CAC 5399.28 -1.18 -0.02%
- IBEX 35 10908.50 -126.30 -1.14%
Oh, and people are still pissed about Comey, which officially makes the former FBI Director the longest lasting story that this news cycle has seen in a long time.