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Talking Points:

  • New Zealand’s unemployment rate unexpectedly fell to the lowest since the 2007-08 crisis
  • The New Zealand Dollar reversed losses that it incurred amid yesterday’s panic selloff
  • RBNZ rate hike expectations swelled ahead of tomorrow’s monetary policy announcement

What will drive longer-term FX market trends? See our forecasts here.

The New Zealand Dollar appreciated against its major counterparts following an overall impressive employment report. New Zealand’s rosy data helped erase losses that the currency incurred amid yesterday’s panic selloff.

The unemployment rate ticked down to 4.5 percent from 4.6 percent in the fourth quarter of 2017. This beat expectations of it rising to 4.7%. That brings the unemployment rate down to its lowest since December 2008, or back during the 2007-08 Global Financial Crisis.

The number of employed increased 3.7% y/y versus 3.6% expected, but the pace of change wasn’t as fast as back in the third quarter when hiring increased 4.2%. In addition, average hourly earnings improved 0.8% q/q versus 0.5% expected. However, it wasn’t as much as the 1.2% increase in Q3.

All the while, the labor force participation rate actually fell to 71.0% as expected, from 71.1%. This could have meant that economists were underestimating the health and vigor of New Zealand’s employers and persistent job seekers. In fact, today’s jobs report outcome ran counter to the trend of local data tending to underperform relative to economists’ expectations since November 2017.

New Zealand’s impressive employment outcome seemed to have increased RBNZ rate hike bets. As the data crossed the wires, New Zealand 2-year government bond yields rallied. However, with the next Reserve Bank of New Zealand monetary policy announcement due tomorrow, we shall soon see what central bank officials themselves have to say on the matter.

New Zealand Dollar Reverses Monday Panic on Striking Jobs Report

On a daily chart, NZD/USD fell below a rising trend line that dates back to mid-December. The break occurred amidst a better-than-expected US NFPs outcome. Since then, the pair continued to decline as aggressive risk aversion struck the markets on Monday. Now, New Zealand’s jobs report helped push the pair higher and it stopped on the 14.6% minor Fibonacci retracement around 0.7342.

A correction higher would put the January 24th high at 0.7438 in sight. Should NZD/USD get caught on immediate resistance and turn back lower, the 23.6% level at 0.7282 might end up as near-term support. A break below that would expose the 38.2% retracement at 0.7186.

New Zealand Dollar Reverses Monday Panic on Striking Jobs Report