Headlines

* Kiwi jumps after RBNZ’s surprise 50bp rate hike

* RBA’s Lowe says April’s pause doesn’t imply rate hikes are over

* Gold holds surge past $2000 with record high suddenly in sight

* Asian shares struggle as US jobs dry up, oil extends rally

FX: USD sunk against most of its peers on Tuesday. The DXY broke down through the halfway point of the 2021 rally at 101.99 and last month’s cycle low at 101.91. Losses again coincided with more soft US data releases. The vacancy data (JOLTS) showed job openings dropped to their lowest since May 2021. The US Treasury 2-year yield sank for a third day, down by 13bps to 3.83%. The 10-year yield also fell, close to the y-t-d low (before the banking crisis) at 3.32%. The March banking turmoil trough was at 3.28%.

EUR pushed up above the recent high at 1.0929. The single currency is strengthening on narrowing interest rate differentials. GBP advanced beyond the year-to-date high at 1.2447. The top at 1.2525 was its highest in ten months. Huw Pill, the BoE’s chief economist left the door open to more rate hikes. USD/JPY moved down below 132 after failing at the 100-day SMA on Monday.

USD/CAD was one of only two majors that outperformed. The major had fallen for six straight days until yesterday. Major support sits at the 200-day SMA at 1.3378. The AUD also underperformed after the RBA left its target rate unchanged at 3.60%. It recently hit resistance at the 100-day SMA at 0.6798. NZD has shot higher today as the RBNZ surprised with a bigger than expected 50bp rate hike. The 11^th straight rise took the OCR to 5.25%, its highest since December 2008. The bank also said there could be more to come. Inflation is still too high and persistent, and employment is beyond its maximum sustainable level.

Stocks: US equities closed lower after the dip in the JOLTS data dimmed labour market and growth expectations. The benchmark S&P 500 lost 0.58%. The Dow finished 0.59% lower. The Nasdaq 100 closed 0.37% down. Equities had rallied in seven out of the last eight sessions. The weak data pulled yields lower and saw investors rotate into defensive assets. This contrast with the last few weeks when banking confidence was the driver.

Asian stocks are mixed after the subdued Wall Street close. The Hang Seng was hampered by closures across Greater China. The Nikkei 225 underperformed amid broad sector weakness.

US equity futures are flat. European equity futures are also pointing to a lower open -0.2%. The Euro Stoxx 50 cash market closed higher +0.1%.

Gold smashed through and closed above the hugely psychological $2000 level. Having tried a few times in March, a strong weekly close above this key mark could see bugs test $2049 and $2070/75.

Day Ahead – Dollar struggles to arrest the downtrend

The world’s premier reverse currency is now around 4% below its stressed peak of mid-March. We mentioned in our weekly webinars a few weeks ago about the “dollar smile” – the USD tends to do well when things are very bad or very good. But it tends to gently sink on any conditions in between. More settled financial conditions (with measures of volatility falling) have seen the greenback reconnect with softer rate differentials.

Markets have moved back in favour of no move by the Fed when it next meets in the first week of May. But these odds have been moving around a lot and are still near a coin flip. This week’s disappointing US data have certainly promoted selling. We still have Friday’s NFP and next Tuesday’s CPI to contend with. The major bottom from February is at 100.82.

Chart of the Day – GBP/USD breaks above 1.25

Sterling surged yesterday to its highest level since last June. There was no data but the softer dollar and comments from a BoE official helped buyers push beyond key resistance around 1.25. Huw Pill said that the bank still cannot be sure that it has raised interest rates enough to tame inflation. He voted last month to lift rates to 4.25%, its eleventh increase since the start of its hiking cycle in December 2021. Money markets currently forecast over 50bps of additional hikes by September, before the bank stops tighening policy.

The peaks in GBP/USD around 1.2447 from late 2022 and Febuary this year look to have been broken. A weekly close should certainly confirm this. A long-term move towards the 200-week SMA above 1.28 could be on the cards. Near-term support below the February top is 1.2274.