NZDUSD Bounce on Jobs Data May be Curtailed by Trade War Risks
NZDUSD, TRADE WAR – TALKING POINTS
- NZDUSD spikes after local jobs data beat forecasts
- US-China trade war tensions may curtail Kiwi’s rise
- Risk aversion is permeating global financial markets
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Amid the market-wide pandemonium, the New Zealand Dollar spiked after local jobs data beat forecasts. The unemployment rate shrunk to 3.9 percent, beating the 4.3 percent forecast. Both the year-on-year and quarter-on-quarter employment change also unexpectedly beat forecasts despite New Zealand’s economy showing growing signs of weakness and need for accommodative monetary policy.
NZDUSD Spikes After Jobs Data Came in Better-Than-Expected
However, it is unclear whether this will significantly alter the Reserve Bank of New Zealand’s (RBNZ) outlook for policy. Last week, the central bank announced that it is looking into using “unconventional” policy measures as a way to boost inflation and jobs growth. The better-than-expected data appears to have offered an ethereal moment of hope, but price action suggests investors are quickly remembering the fundamental environment.
NZDUSD Coming Back to Earth
US-China trade relations have hit a new low and has caused market-wide risk aversion and lead to the S&P 500 shaving off over 5 percent in less than a week. The Treasury Department has designed China as a currency manipulator after USDCNH crossed the 7.00 psychological threshold. The PBOC responded to the price move saying it was the result of expectations of further tariffs and protectionism.
As an export-driven economy with a strong reliance on Chinese growth, New Zealand – along with Australia – are some of the most vulnerable economies to a downturn in US-China trade relations. Escalation between Beijing and Washington continues to spook financial markets and is leaving commodity-linked currencies like NZD in the proverbial dustbin as traders redirect capital to anti-risk assets like Treasuries and the US Dollar.
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.