NZDUSD have been all over the place in last 12 hours, as widespread USD strength fights kiwi weakness. This has pushed the pair towards trend line support and has compounded some technical weakness in price. From here we’re eyeing off support around 0.7480 – trend line support and recent low.
The plummeting kiwi is being pushed lower by softer than expected Q1 employment numbers out of NZ. The unemployment rate unexpectedly remained at 5.8%, after being revised higher in Q4 from 5.7%, and employment only increased by 0.7% over the quarter (expected 0.8%). Furthermore, average hourly earnings only increased 0.2% q/q, completely missing an expected 0.9% q/q increase – wage price inflation has a major influence on overall inflation, as consumers can’t spend if they don’t have money. The only bright spot in the report was an increase in the participation rate to 69.6% from a revised 69.4%.
The employment report is likely to add to the case for looser monetary policy in NZ. Just last week the RBNZ introduced a dovish bias as it awaits more economic data. In fact, it explicitly stated that “it would be appropriate to lower the OCR if demand weakens, and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target.” This means that the RBNZ is closely monitoring the pace of wage growth and numbers below its official inflation forecast may prompt a rate cut. While this one piece of economic data isn’t going to determine the future of monetary policy in NZ, it tips the scales further in favour of lower interest rates in NZ.
Prior to today’s employment numbers, another soft auction result from GDT was hurting the commodity currency. GDT’s Price Index dropped 3.5% since the last auction in mid-April, after dropping at the previous three auctions. The NZ economy is heavily export oriented, with a specific focus on dairy, thus persistent soft dairy auctions don’t bode well for the commodity-backed kiwi.
Source: FOREX.com
Recommended Content
Editors’ Picks
EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.