NZD/USD drifts higher to 0.6100 following New Zealand’s labor market data

The NZD/USD pair attracts some buyers during the early Asian session on Wednesday. The recovery of the pair is bolstered by the corrective move in the US dollar and upbeat New Zealand labor market data for Q4. Later on Wednesday, the US Balance of Trade is due and Fed officials such as Kugler, Collins, Barkin, and Bowman are set to speak. NZD/USD currently trades near 0.6098, gaining 0.26% on the day. 

The latest data from Statistics New Zealand reported on Wednesday that the nation’s Unemployment Rate in the fourth quarter (Q4) came in at 4.0% versus 3.9% in the third quarter, above the market consensus of 4.2%. Additionally, Employment Change climbed to 0.4% in Q4 from a 0.2% drop in Q3, better than the expectation of a 0.3% rise. 

On the other hand, Federal Reserve (Fed) Bank of Cleveland President Loretta Mester said on Monday that if the economy evolves as expected, policymakers will probably gain the confidence to lower interest rates later this year, but she doesn’t see a need to rush. She further stated that Fed officials want to see more evidence that inflation is cooling toward their 2% target. 

On Sunday night, Fed Chair Jerome Powell said that the US central bank remains on track to cut interest rates three times this year, a move that’s expected to begin as early as May. That being said, the hawkish remarks from Fed officials might lift the Greenback and cap the upside of the NZD/USD pair. According to the CME's FedWatch Tool, the odds for a rate cut in March currently stand at 15% and rise to 50% for the May meeting.

In the absence of top-tier economic data releases from the US, traders will focus on Fedspeak throughout the week. The speech might not impact the market much from what we heard at Fed Chair Powell's press conference, but the central bank needs to see more inflation data to ensure that it returns to a 2% inflation target sustainably