New Zealand Dollar eyes NZ employment

The New Zealand dollar is trading at 0.5608 in the European session, down 0.35% on the day. On Monday, NZD/USD fell as much as 1.2% but managed to recover most of these losses.

New Zealand employment expected to decline

New Zealand releases its employment report on a quarterly basis and we’ll get a look at data for the fourth quarter 2024 later today.  The market estimate stands at -0.2% q/q, following a reading of -0.5% in the third quarter.  Unemployment has been climbing and is expected to hit 5.1%, up from 4.8% in the third quarter.

The weak labor market is a reflection of a struggling economy.  New Zealand GDP fell 1% in the third quarter which marked a second straight quarter of negative growth and means that the economy is in recession.

For the Reserve Bank of New Zealand, the weak economy is an opportunity for the central bank to continue lowering interest rates.  The RBNZ meets next on Feb. 19 and is expected to chop rates by 50 basis points, which would bring the cash rate to 3.75%.  The RBNZ has been aggresssive in its easing cycle and cut rates by 50 bp at its last meeting in Nov. 2024.

RBNZ policymakers are keeping a close look at US President Trump’s tariffs, which go into effect today against Canada and China.  Trump has threatened other countries with tariffs, although New Zealand is off the list.  Still, the tariffs could lead to higher inflation and a higher US dollar, which could help New Zealand exports but would hurt households who would face higher prices.

The US releases JOLT Job Openings later today, with a market estimate of 8.09 million for December, compared to 8.00 million in November.  The US labor market has been resilient and we’ll get a look at US nonfarm payrolls on Friday.

NZD/USD technical

• NZD/USD tested support at 0.5595 earlier.  Below, there is support at 0.5549.

• There is resistance at 0.5674 and 0.5720.