Dollar steadies as Gulf oil risk returns and NZ inflation undershoots

The dollar edged slightly higher late on Wednesday as fresh Gulf security warnings pushed oil back up and traders positioned ahead of a busy run of central bank meetings. In Asia, New Zealand's third-quarter inflation came in below forecasts, a test for the kiwi after a strong week.

What moved and why

Investing.com described the dollar as up slightly, with other currencies seeing only small moves "ahead of central bank deluge". The main new risk came from the Gulf. According to investingLive, citing a Reuters report, the US State Department is preparing to order the departure of some personnel and family members from US embassies across the Gulf. investingLive said crude oil moved back to the upside on concerns about renewed hostilities, particularly involving the Iran-aligned Houthis.

Risk appetite held up anyway. The investingLive Americas wrap reported US stocks closed higher, led by the Nasdaq, as AI optimism offset Gulf oil risks. European stocks also closed higher.

Treasuries sent a mixed signal. Earlier in the day, Investing.com reported US yields dropped on safe-haven flows, while French yields hit the 5% mark. Then the US 20-year auction was soft. According to investingLive, the Treasury sold $13 billion at a high yield of 5.469%, above the 5.420% prior and tailing the 5.460% when-issued level by 0.9 basis points. Bid to cover was 2.73 times versus a 2.62 average. investingLive graded the auction a C.

New Zealand CPI undershoots

investingLive reports that New Zealand Q3 CPI rose 3.7% year on year, below the 3.8% expected and down from 4.1%. The quarterly rate was 0.7% against 0.8% expected and 1.5% prior. The outlet's preview had framed the release as coming ahead of a likely RBNZ hike. The miss arrives after NZD/USD gained 1.39% over five fixings, the best run among the majors. Chart: NZD/USD.

The majors

ECB reference rates from the 21 October fixing, compared with the 20 October fixing:

The Aussie was the strongest major at the fixing, moving above 0.70. Sterling's gain reflected the UK CPI beat covered earlier today; online-forex.com has a primer on headline versus core inflation using the UK release. investingLive noted the more concerning detail for the BoE may be services inflation jumping to 3.7% from 3.4%, while core matched forecasts at 2.8%. USD/CAD is down 1.22% over five fixings. Chart: AUD/USD.

The euro held up despite French bond stress. investingLive said in the morning that EUR/USD was holding above 1.1200 near 1.1215, but warned that widening yield spreads offered a warning.

Central banks in the news

• ECB: Philip Lane spoke on euro liquidity lines and the international monetary system. Piero Cipollone gave a speech titled "Pontes and Appia: unlocking opportunities for banks".
• BoE: investingLive said market reaction to UK CPI was muted because a November hike was already fully priced.
• RBNZ: a hike was described as likely in investingLive's CPI preview, before today's softer print.

What to watch next

1. Kiwi reaction to the CPI miss and any shift in RBNZ hike pricing.
2. The central bank "deluge" flagged by Investing.com.
3. Gulf embassy news and US-Iran headlines for oil and safe-haven flows.
4. French yields near 5% and euro-area spreads.
5. Follow-through in Treasuries after the tailed 20-year auction.