NZ Dollar Uninspired by Better Than Expected Employment Figures
- The New Zealand Dollar failed to sustain gains against its major counterparts
- Unemployment rate, employment change and participation rate better than expected
- Reserve Bank of New Zealand comments remain central focus for the near term
After an initial surge, the New Zealand Dollar failed to sustain gains against its US counterpart as strong employment data appeared be overshadowed by last week’s RBNZ statement. The second quarter unemployment rate fell to 5.1 percent versus 5.3 percent expected and 5.2 percent recorded in the first quarter. Meanwhile, employment grew 4.5 percent y/y and 2.3 percent q/q versus 2.0 percent y/y and 1.3 percent q/q in the 1Q respectively. The labor force participation rate increased to 69.7% compared to the decline to 68.8% estimated. This marks the highest participation rate recorded since at least 1986.
Two year New Zealand government bonds held steady as the employment figures crossed the wires, suggesting that today’s data did little to change near term RBNZ rate cut expectations. Overnight index swaps are pricing in at least one 25 basis point rate cut over the next 12 months. Curiously, Statistics New Zealand mentioned that they introduced a new labor force survey and that today’s jobs growth was overstated after that methodology adjustment.
Last week, the Reserve Bank of New Zealand announced a 25 basis point rate cut that ended up pushing the NZ Dollar higher. The central bank hinted that it will wait at least until early 2017 to reassess the need for further easing. Perhaps this could explain today’s cautious reaction from the markets.
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