NZD/USD: RBNZ to distract traders momentarily from Ukraine crisis-risk

• NZD/USD bears have moved out of the way and the bulls are in charge in early Asia.
• All eyes will turn to the RBNZ as the Russian risk abates as a chorus of Western measured sanctions ease, markets. 

NZD/USD is currently trading at 0.6734 and is coming to a close in the North American session, up by over 0.5%. Commodity-FX is getting a lift from inflation expectations and the kiwi is poised for further gains on expectations of a hawkish outcome from the Reserve Bank of New Zealand today.

The Russian factor is not impacting risk as hard as it has done as traders begin to look through the headlines that have so far not delivered anything that indicates Russian troops are infiltrating the borders of Ukraine. So far Russia’s presence in Ukraine is limited to the two separatist areas which Putin recently formally recognised.

Additionally, the measured sanction response from the West has steadied the markets. In the North American session, US president Biden announced the first tranche of sanctions on Russia by implementing sanctions on Russian sovereign debt and by imposing sanctions on Russian elites and family members. Biden also announced that the US will be working with Germany to halt the Nord stream 2 while also issuing full blocking sanctions on two Russian banks.

As for the RBNZ, ''market expectations continue to favour a 25bp (rather than 50bp) RBNZ OCR hike today; if delivered, that should provide a fairly solid base for the NZD on the view that measured hikes will be more digestible for the economy and are less likely to deliver a hard landing,'' analysts at ANZ bank said in a note today. 

''NZ’s long term interest rates are already best in class – so the interest rate differential box has already been ticked and that won’t change much with a lesser hike. But with markets split on the OCR decision, expect more volatility, especially with Russia/Ukraine tensions still apparently escalating.''