New Zealand Dollar Slumps on Swelling RBNZ Rate Cut Bets

Talking Points:

• New Zealand Dollar falls as soft PSI data boosts RBNZ rate cut bets
• British Pound corrects higher after last week’s broad-based selloff
• US Dollar, Yen vulnerable as S&P 500 futures hit at risk-on mood

The New Zealand Dollar underperformed in overnight trade. The currency fell alongside front-end borrowing costs, hinting that firming RBNZ rate cut expectations may have been behind the move. A sharp drop in the Bank of New Zealand’s Performance of Services index may have helped spark the selloff. The report showed the pace of activity growth in the non-manufacturing sector plunged to the weakest since November 2014. The British Pound mounted what appeared to be a corrective recovery having lost ground against all of its major counterparts last week.

Looking ahead, a quiet economic calendar is likely to make for a quiet, consolidative start to the trading week. S&P 500 futures are pointing cautiously higher, hinting at a risk-on mood that may translate into near-term weakness for the anti-risk US Dollar and Japanese Yen. Lasting follow-through seems unlikely however. A wealth of high-profile event risk is due to cross the wires in the days ahead and traders are unlikely to commit to a firm directional bias in the interim.

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European Session

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