Rates as of 0500 GMT

Market Recap

The focus this morning is on, which plunged after the NZ government introduced a raft of new measures aimed at holding down house prices. Im not going to bore you with the details, if youre interested you can read about it on Bloomberg or The Guardian, which doesnt have a paywall. The key point is that there are two ways to rein in house prices through legal and financial measures like what they did, or by raising interest rates. Since they took the first route theres not going to be any need for them to take the second route.

You may remember back on Feb. 24, when Finance Minister Grant Robertson announced that the Reserve Bank of New Zealand RBNZs remit would be amended so that the bank considers the impact on housing when making monetary and financial policy decisions. The kiwi jumped when that announcement was made as investors assumed it would mean higher interest rates that the RBNZ would have to raise rates, in order to hold down house prices. Well, the government found another, more focused way to accomplish that goal without using the blunt tool of higher interest rates and so the market is no longer pricing in a rate hike this year. Rate expectations have fallen back to where they were before the change to the remit was announced.

Moves like this often continue for some time so Id expect NZD and AUD to remain weak today.

The big move in NZD only masks other significant moves in the market today too. CHF was the…