The US dollar has come under a broad-based pressure from all G7 currencies last week. This seems to be related to the Fed’s ultra-hawkishness, which sounds like a contradiction, but if they really trigger a recession through aggressive tightening, yields and the USD will drop.
There’s also the angle that by tightening aggressively early in the cycle, the Fed could slow down later. This is what the RBNZ have already said they intend to do and yields in New Zealand dropped slightly in response.
On Tuesday, retail sales will be in focus ahead of the RBNZ monetary policy decision on Wednesday. The markets are expecting a 50-basis point rate hike. Impressive retail sales figures could support a bigger move. Also the US will have some news from the Fed on Wednesday, the FOMC meeting minutes should provide few surprises following recent Fed Chair Powell speeches.
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