• NZD/USD fell over a point to 11-month lows as the RBNZ struck a more dovish than anticipated tone and remained in favour of accommodative policy
• Asian equities were kept afloat by upside in energy names in the wake of yesterday’s DoE report
• Looking ahead, highlights include UK Industrial and Manufacturing Production, BoE policy announcement, ECB’s Constancio, Praet and Fed’s Dudley

ASIA

Asia equity markets traded mostly higher following a similar lead in the US where energy outperformed in the wake of the DoEs. This in turn supported energy names in the ASX 200 (+0.1%) with a continued recovery in the largest weighted financials sector also helping the index to stay afloat. Nikkei 225 (+0.4%) remained driven by recent JPY weakness as the index extended on its highest levels last seen in 2015 to draw closer to the 20,000 level. Hang Seng (+0.4%) and Shanghai Comp. (-0.4%) were mixed with the latter weighed amid a slump in Chinese commodity prices and tougher regulatory concerns. 10yr JGBs were lower as safe-haven demand was dampened amid gains in riskier Japanese assets, while the 30yr auction failed to support with the auction prices lower than last month.

PBOC are to inject CNY 60bln in 7-day reverse repos, CNY 10bln in 10-day reverse repos and CNY 10bln in 28-day reverse repos.

PBoC set CNY mid-point at 6.9051 (Prev. 6.9066).

EUROPE/UK

UK RICS House Price Balance (Apr) M/M 22% vs. Exp. 20% (Prev. 22%). (Newswires)

YouGov/Times poll showed Conservatives with 46% vs. Labour at 30% ahead of UK election next month. (Newswires)

The CityAM BoE Shadow MPC voted 7-2 to hold rates steady, a more hawkish ratio than the Bank at the last meeting, which saw a first sign of dissent. (CityAM)

FX

NZD/USD declined over 1 point to an 11-month low following the RBNZ policy decision where the central bank kept rates unchanged at 1.75% as expected and commented that accommodative policy will remain for a considerable period. This was a more dovish than expected tone from the central bank in comparison to the outside calls for the bank to signal a tightening bias. AUD/USD was pressured in sympathy and alongside weaker Chinese commodity prices, while USD-counterparts utilized Asia hours again to nurse losses against the greenback aside from CAD which suffered after Moody’s dished out rating downgrades on 6 Canadian banks.

RBNZ kept Official Cash Rate unchanged at 1.75% as unanimously expected. RBNZ stated that accommodative policy will remain for considerable period, while the bank added that numerous uncertainties remain and policy may need to adjust accordingly. (Newswires)

RBNZ Governor Wheeler stated the central bank is neutral on monetary policy and expect OCR to remain 1.75% for the foreseeable future, while he added that inflation expectations would need to increase for a hike in OCR. (Newswires)

RBNZ Assistant Governor McDermott stated that underlying inflation pressure is same today as it was in February and added he is not unhappy about the decline in NZD from the rate decision. (Newswires)

COMMODITIES

Price action across the commodities complex was centred around China as Dalian iron ore futures resumed its recent rout and dropped 5% shortly after the open of metals trade in China. Elsewhere, WTI crude futures remained firm and held on to yesterday’s post-DoE gains, in which a larger than expected draw of 5.2mln barrels underpinned prices above USD 47/bbl, while gold (Unch) and copper were uneventful with the latter edging minimal gains amid a mostly positive risk tone.

GEOPOLITICAL

US Pentagon said that North Korea must still solve important shortfalls in developing a nuclear-armed ICBM before it can deploy a weapon capable of striking the US. (Newswires)

US

The treasury market saw a late sell off, spurred by a poor 10y auction where a 1.8 tail and a low b/c was seen and as a result the 10y T-note future came back from earlier gains, settling at 124.26, down half a tick.

Fed's Kashkari (Voter, Dove) stated that he wants Dodd-Frank regulations kept in place for big banks but relaxed with smaller banks. (Newswires)

Fed's Rosengren (Non-Voter, Hawk) repeated he favours 3 more rate hikes in 2017 alongside balance sheet reduction, while added the Fed should explore its pace of tightening and favours balance sheet reduction after the next hike. (Newswires)

US House Speaker Ryan said there were no red lines regarding corporate tax rates and added the lower the better. (Newswires)

US Federal Budget Balance (Apr) M/M 182.4B vs. Exp. -175.8B (Prev. -176.0B)

Deutsche Bank reduced 2017 US GDP forecast to 2.5% from 2.7% and cut 2018 GDP forecast to 2.25% from 3.25% as they see the passing of any significant tax cut or fiscal stimulus as less likely than previously anticipated. (Newswires)