Rates as of 0500 GMT

Market Recap

A more riskon sentiment during the European and US days, with the Euro STOXX 600 index up 0.35 and the SP 500  up 2.5, with every sector higher on the day led by energy 5.1. But sentiment seems to have taken a downturn during the Asian day as the demand destruction narrative gains traction again. Oil is down, the MSCI Asia exJapan index is  1.8, and the SP futures are 1.1 from Tuesdays close.

The big question of the day is why is NZD the biggest loser? It seems to have been following risk sentiment down, but that doesnt explain why it might do worse than some others, like AUD, which are also sensitive to risk sentiment.

There wasnt that much news out of New Zealand overnight. The average price for whole milk powder fell 0.8 at the biweekly auction, which may have had some effect. The real decline set in with the results of the New Zealand trade data, which showed the deficit widening on a 12month moving average basis see table above.

The real anomaly I found for New Zealand though was the big drop in inflation expectations.

Why is this? I dont know for sure. One possible explanation is a Bloomberg story on the risks to global housing markets as interest rates rise. The article identified New Zealand as the most overpriced housing market in the world.

In any case, rate expectations in New Zealand came off a bit and so its no surprise that NZD did as well.

As for other currencies, I didnt see anything unusual about US rate…