A busy Wednesday of macroeconomic data and policy changes is expected to drive currency movements, with the euro-dollar nearing parity, the pound up for the seventh day in a row but the New Zealand dollar topping the charts.

The Kiwi was sent higher as the Reserve Bank of New Zealand lifted interest rates 50 basis points to 3.5%, a seven-year high, and promised further hikes as “inflation is too high and labour resources are scarce”.

This might dampen some of the buoyancy in FX markets that drove a broad risk rally yesterday.

Optimism was built on the sands of a softer than expected Australian rate hike, which has been taken as a sign that the central banks may be slowing the pace of their rate hikes – which now has been somewhat dispelled this morning by the RBNZ.

Currency volatility, as tracked by Deutsche Bank's Cvix index that measure three-month implied volatility across G10 currency pairs, is at its highest point since the initial pandemic outbreak in early 2020 and before that the sovereign debt crisis around a decade earlier. TO see the best rates click here

USD weakness seen in the past week lingered, with the dollar index (DXY) sliding to the 110 mark, back to where it was a fortnight ago.

On Wednesday morning the euro came within a whisker (0.99948) of regaining parity against the dollar, but the rough movement was a continuation of the sideways move from the day before.

Sterling also continued its recuperation, up 0.1% against the US dollar to 1.14845, as well as 0.2% higher versus EUR and its biggest gains of 0.4% against the JPY and NOK.

Wednesday’s economic calendar is full of services purchasing managers’ index (PMI) prints from most major economy.

A non-monetary policy meeting also takes place, as well as an OPEC meeting.

Later, the US ADP employment report will be due but is seen as an unreliable forerunner of Friday’s all-important non-farm payrolls report.