Talking Points:

NZ Dollar Sinks as RBNZ’s Wheeler Threatens FX Market Intervention
Euro May Not Find Volatility in German Factory Orders, EZ PMI Data
US Dollar Hoping for a Lifeline as Fed’s Yellen Testifies to Congress

The New Zealand Dollar underperformed in otherwise quiet overnight trade following ominous comments from RBNZ Governor Graeme Wheeler. The central bank chief said the currency is unsustainably overvalued and threatened to intervene against the exchange rate if fundamentals worsen. The Kiwi slid as much as 0.6 percent on average against its leading counterparts.

The economic calendar is relatively quiet in European hours. The March set of German Factory Orders and April’s Eurozone Retail PMI figures headline the docket. These outcomes may not generate meaningful follow-through from the Euro however, with activity data likely playing second fiddle to the disinflation issue and its implications for the ECB. With that in mind, the single currency will probably have to wait Thursday’s monetary policy announcement to find a potent catalyst on the domestic front.

Later in the day, the spotlight turns to Fed Chair Janet Yellen, who is scheduled to testify before the Joint Economic Committee of Congress on the outlook for the US economy and the direction of monetary policy. Needless to say, the markets will be most concerned with what her comments imply about the continuity of the Fed’s QE “tapering” cycle and the possible timing of an eventual interest rate hike. The US Dollar sank to the lowest level in six months yesterday signs of firm commitment to policy normalization in Yellen’s remarks may offer a lifeline to the beleaguered currency.

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