European Open: it’s all about Crude

Overnight price action saw a tepid rebound in risk sentiment, all dependant on Crude. OPEC production cuts are nowhere to be seen, and the market remains in a sell-rally stance. This poses significant positioning risks going into FOMC, RBNZ and BoJ.
Crude dicates risk on/off sentiment
Australian CPI was better than expected, which is a decent surprize – so the RBA might want to “wait and see” for longer.  The hawkish surprize, along with the slight recovery in risk-appetite, has also maintained Nzd afloat despite the market’s expectations for a dovish lean during tonights’ RBNZ meeting. I remain bearish on Nzd unless we break 6560.
Also, the FOMC has very little to celebrate since most data prints since December have been worse. Any further dovishness should play into the hands of short UsdCad positions, where Poloz’ neutral language plus the recovery in Crude have already threatened 1.40. We might get another push tonight. But again, I will play the reaction, I won’t gamble before hand.

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