The US Dollar’s (USD) gains are extending into Wednesday’s NA session with broad strength against all of the G10 currencies. NZD is underperforming, down 0.6% on the back of an unexpectedly large RBNZ rate cut, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD extending this week’s gains

"The kiwi initially fell nearly 1% in the immediate aftermath of the surprise 50bpt cut to 2.50% (25bpts had been expected). The cut was paired with dovish rate guidance as policymakers expressed concern about the outlook for growth. The JPY’s weakness remains equally impressive as market participants assess the outlook for BoJ tightening in the aftermath of this weekend’s LDP leadership election that delivered a win for the pro-fiscal/monetary interventionist candidate Takaichi. The yen’s decline has already been so drastic that it has garnered the attention of the Minister of Finance with comments that he will ‘closely watch’ for any ‘excessive’ moves, a form of verbal intervention that is widely understood as a threat ahead of potential action."

"Most of the remaining G10 currencies are showing modest losses, with the EUR, CHF, and SEK down about 0.3% as the GBP and MXN fall a marginal 0.1%. The CAD is trading flat to the USD and outperforming on the crosses, buoyed by positive developments out of Tuesday’s Trump/Carney meeting in DC. The broader market’s tone is looking increasingly tenuous as market participants assess the sustainability of the AI-driven rally in an environment of burgeoning political risks across the US, Japan, and France. The US 10Y is pushing lower and extending Tuesday’s bearish outside reversal, falling back to the lower end of its recent range."

"In commodities, the price of oil is tentatively extending its recent recovery from its recent low around $60/bbl, supported by expectations of restrained production increases from OPEC. The price of copper is seeing renewed strength, extending its rally to fresh recovery highs as the price of gold easily clears the psychologically important $4000/oz barrier. In terms of releases, we look to the Treasury’s Federal Budget Balance figures at 2pm ET. Fed risk is elevated as the FOMC’s latest minutes will also be released at 2pm ET. Wednesday’s speakers include Musalem, Barr, Goolsbee, and Kashkari."