- New Zealand’s jobless rate is likely to remain unchanged at 4.9% in Q1 2021.
- All eyes remain on the participation rate for RBNZ’s likely policy action.
- Disappointing figures could exacerbate the pain in the kiwi, with 0.7100 at risk.
New Zealand’s Deputy Prime Minister and Finance Minister Grant Robertson said Tuesday that he “expects latest unemployment rate data this week to "bounce around a bit". However, the South Pacific Island nation’s labor market recovery is likely to see little improvement in the first quarter of 2021.
New Zealand’s unemployment rate is expected to hold steady in the March quarter after surprising markets to the upside in the final quarter of 2020, the NZ Statistics will show this Wednesday.
NZ labor market on a modest recovery path
The NZ Unemployment Rate is expected to hold steady at 4.9% in Q1 2021 after falling sharply from 5.3% seen in Q3. The economy witnessed a 0.2% jobs growth in the reported period vs. +0.6% seen in Q4. The Participation Rate is likely to tick a tad higher at 70.3% in the first quarter of 2021 vs. Q4’s 70.2%.
Focus on the participation rate and RBNZ policy action
After a big surprise booked in the December quarter, a consolidation in New Zealand’s labor market recovery is unlikely to throw the markets off-guard.
However, the focus will remain on the participation rate, which is the percentage of the population actively looking for work, as the pace of hiring is expected to slow amid a steady unemployment rate.
If the participation rate doesn’t rise as expected, it would be reflective of higher unemployment in the economy. Meanwhile, a higher participation rate and strong job growth could eventually drive up wage inflation over the coming quarters.
The main question is how would the employment indicators alter the Reserve Bank of New Zealand’s (RBNZ) steady course on monetary policy. In its February economic projections, the central bank had expected a slight rise in unemployment to 5%.
Meanwhile, the RBNZ policymaker Peter Harris said last month that the central bank is still not meeting its employment objective, suggesting that there is no need to remove monetary stimulus at the moment. He further emphasized that unemployment remains 'relatively high' while dismissing signs of wage inflation.
NZD/USD probable scenarios
Therefore, any downside surprise to the employment indicators could fan expectations of additional easing by the RBNZ, which could exacerbate the pain in the kiwi.
Ahead of the jobs data release, the central bank is likely to release its Financial Stability Report (FSR), which will also have a significant impact on the kiwi. Additionally, the risk tone and the US dollar price action could also affect NZD/USD’s reaction to the Q1 employment report.
If the employment report betters expectations, then it could offer a much-needed reprieve to the NZD bulls. At the time of writing, the kiwi is refreshing 11-day lows near 0.7130, shedding 0.83% on a daily basis.
In the four-hourly technical setup, the price is fast approaching horizontal trendline support at 0.7119, as the sell-off gathered pace on a breach of the bullish 100-simple moving average (SMA) at 0.7173. The Relative Strength Index (RSI) remains bearish, suggesting more room to the downside should the data disappoint. The critical 200-SMA at 0.7101 could be put at risk, opening floors towards 0.7050 psychological level. A rebound towards the 100-DMA support now resistance cannot be ruled out on a positive surprise, with 0.7200 as the next upside target.
NZD/USD: Four-hour chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD eases below 1.0850 on renewed USD strength
EUR/USD stays under pressure and trades in the red below 1.0850 in the European session. Although the ZEW survey for Germany and the Eurozone showed a noticeable improvement in economic sentiment, broad USD strength doesn't allow the pair to gain traction.
GBP/USD drops below 1.2700 on notable US Dollar demand
GBP/USD is extending the downside below 1.2700 in the European trading hours on Tuesday. The ongoing bullish momentum in the US Dollar, despite sluggish US Treasury bond yields, undermines the pair. Mid-tier US housing data are coming up next.
Gold price struggles to lure buyers, holds steady above one-week low ahead of FOMC meeting
Gold price ticks lower amid reduced Fed rate cut bets, elevated US bond yields and stronger USD. Geopolitical tensions could lend some support to the safe-haven XAU/USD and help limit losses.
Why is the crypto market crashing?
The two most important contribution to the ongoing bull market is the meteoric rise in Bitcoin due to the ETF approval and the sudden interest spike in Solana ecosystem. But the recent move suggests that the upward momentum is dissipating and a correction looms.
Canada CPI Preview: Inflation pickup could scale back bets on early interest-rate cut
The Canadian Consumer Price Index is expected to have risen by 3.1% YoY in February. The BoC shows no rush to lower its interest rate. The Canadian Dollar maintains its multi-day lows against the US Dollar around 1.3540.