NZ Dollar Soars After Better Than Expected Employment Figures

Talking Points

• Kiwi Dollar gained against its US counterpart after employment figures crossed the wires
• Unemployment rate, employment change and participation rate all better than expected
• Front-end bond yields rose with the currency, signaling diminished rate cut expectations

The New Zealand Dollar gained against its US counterpart after better than expected employment figures crossed the wires, hinting the expectation for an RBNZ rate cut has diminished. The third quarter unemployment rate fell to 4.9 percent versus the 5.1 percent expected and the 5.1 percent recorded in the second quarter. Meanwhile, employment grew 6.1 percent y/y and 1.4 percent q/q versus the 5.4 percent y/y and the 0.5 percent q/q that had been expected. The labor force participation rate increased to 70.1 percent versus the 69.7 percent expected and 69.7 percent recorded previously.

The Kiwi rose alongside front-end bond yields after the data was released, which may suggest that the markets expectation for an RBNZ rate cut in the near term has diminished. However, with the current assumptions remaining that the RBNZ will be working toward further policy easing, we will have to wait until next week’s policy decision to see if today’s strong data today will shake the RBNZ into a less dovish stance.