New Zealand Dollar Dips on Soft Unemployment Data, Fed in Focus

TALKING POINTS – NEW ZEALAND DOLLAR, UNEMPLOYMENT, RBNZ

• New Zealand unemployment data underwhelms markets
• RBNZ not likely to implement rate hike until Q3 of 2019
• Benchmark rate futures most dovish since September 2016

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The New Zealand Dollar fell against its US counterpart along with 2-year bond yields as second-quarter unemployment data for underwhelmed. The jobless rate rose to 4.5%, exceeding the 4.4% forecast. Markets are now speculating that the RBNZ will implement their next rate hike no sooner than September 2019.

Interest rate futures have pointed to a downward trend in rate hike expectations since April. Indeed, the markets now price in the probability of an interest rate hike this year at zero percent.

Looking ahead, the Kiwi Dollar will focus on the Federal Reserve monetary policy announcement, due August 1st at 18:00 GMT. A hawkish tone in official rhetoric may boost FOMC rate hike bets, highlighting the New Zealand currency’s widening yield disadvantage against its US namesake and sending it lower.

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--- Written by Dimitri Zabelin, Jr Currency Analyst, DailyFX