NZD: Dips 1%, As USD Retraces Post FOMC Losses, Trade Data In NZ Soon

While the G10 fell against the US dollar (USD BBDXY +0.2%), which was boosted by higher yields, AUDUSD was only slightly lower at 0.6352. RBA Governor Bullock’s warning not to expect a series of rate cuts supported the Aussie as did stronger equities. 

• The bull theme remains intact as AUDUSD continues to hold above key resistance at 0.6331. The move above this level highlighted a stronger reversal and opened up resistance at 0.6414. Initial support is at 0.6305, 50-day EMA.
• Kiwi underperformed on Tuesday ahead of today’s RBNZ decision. In contrast to the RBA’s cautious 25bp cut, the RBNZ is unanimously expected to ease by another 50bp which would bring the total to 175bp. As a result, AUDNZD returned above 1.11 and is now up 0.5% at 1.1135.
• AUDJPY is 0.3% higher at 96.60. AUDEUR rose 0.3% to 0.6080, close to the intraday high. AUDGBP is moderately higher at 0.5038 after a high of 0.5051.
• Equities were stronger with the S&P up 0.2% and Euro stoxx +0.25%. Oil also rallied with Brent +0.7% to $75.75/bbl. Copper fell 1.7% though while iron ore is higher at around $107/t.
• Today Q4 wages print and are expected to rise 0.8% q/q and 3.2% y/y down from 3.5% in Q3. Westpac’s leading index for January is also released.

The minutes to the January 28-29 FOMC meeting (due out 1400ET/1900GMT Wednesday Feb 19) will be scrutinized primarily for three things: why the Fed shifted its statement language on inflation; was there any discussion of a rate hike scenario; and was there any further discussion over the potential impact of government policy shifts?

• Since the January meeting, FOMC participants have become more hawkish – or at least, more patient.
• We have shifted the dots in our Hawk-Dove Spectrum toward the hawkish end pretty much across the board – with sentiment toward a prolonged hold seemingly building.
• MNI's preview of the Minutes includes what to watch for upon release; MNI's FOMC Hawk-Dove Spectrum, and key highlights of FOMC participant commentary since the January meeting.
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