NZD

• US yields fall. No change from the US Fed, but the tone was ‘cautious’. This, softer US data, & lower debt issuance projections weighed on US yields.• Positive sentiment. The moves in US rates helped support equity markets & cyclical currencies like the AUD. The AUD outperformed over the past 24hrs.• Yield spreads. The RBA is expected to hike rates next week & further steps are possible. This shift has seen yield spreads move in favour of a higher AUD. A sizeable drop in US bond yields was the dominating market development overnight. US yields fell by 14-19bps across...

• Positive vibes. Equities & bond yields rose, & the USD eased as diplomatic efforts aimed at avoiding a wider Middle East conflict calmed nerves.• AUD bounce. The backdrop supported the AUD. RBA minutes released today. China data due tomorrow, with new RBA Gov. Bullock also speaking.• US data. US retail sales & industrial production data released tonight. The US economy is consumer driven. There are signs spending is cooling. A reversal of fortunes overnight with financial markets starting the week on a more positive footing. In terms of the Middle East diplomatic efforts aimed at avoiding a wider conflict,...

• Risk aversion. Middle East developments have weighed on risk sentiment. Bond yields & equities lower, while gold, oil, & the USD have been supported.• AUD pressure. The backdrop is pressuring the AUD. But we think it is starting to look stretched on several metrics. A lot of ‘bad news’ could already be priced.• Event radar. US retail sales, China data, AU jobs, & NZ CPI due. RBA Gov. Bullock speaks, & there is a conga line of Fed speakers including Chair Powell. Events in the Middle East have been front of mind for markets. Risks that the conflict is...

• US CPI. The data caused a bit of a market conniption with US bond yields & the USD jumping up. This & negative risk sentiment weighed on the AUD.• Over-reaction? We think markets may have over-reacted. Rents boosted services prices, but more broadly there are signs progress is (slowly) being made.• Event radar. Since 2015 the AUD has only traded below current levels ~1% of the time. China trade & CPI, & the MAS meeting are in focus today. US CPI inflation was in focus overnight, and the result, even though it was very close to expectations, caused a...