NZ dollar jumps on solid jobs report

NZD/USD is sharply higher today. In the European session, the New Zealand dollar is trading at 0.5883, up 0.71%.

New Zealand employment data shines

New Zealand posted a strong employment report for the third quarter, indicative of a robust labour market. Employment rose 1.3% QoQ, up from 0.0% in Q2 and above the consensus of 0.5%. The unemployment rate remained at 3.3%, just shy of the consensus of 3.2%. As wage inflation remained unchanged at 3.8% YoY, above the estimate of 3.4%.

The labour market continues to suffer from staff shortages and capacity limits, which has contributed to spiralling inflation. This report will add to the pressure on the Reserve Bank of New  Zealand to continue to raise rates. The RBNZ has raised the cash rate to 3.50%, its highest since 2015. Still, the steep tightening has failed to curb inflation, and the central bank is likely to respond with a 75-basis point hike later this month, after five straight hikes of 50 basis points.

Inflation in Q3 came in at 7.2%, and the RBNZ finds itself much further behind inflation than it had anticipated. The hot inflation report has raised expectations that the central bank will raise rates to a peak of  5.0% or even higher in early 2023. This leaves the RBNZ with little choice but to continue with oversize rate hikes, despite the spectre that further oversize rate hikes will tip the economy into a recession.

The spotlight is on the Federal Reserve, which winds up its 2-day policy meeting later today. This would bring the benchmark rate to 4.0%. The question on the minds of investors is what happens next? The final meeting of the year is on December 14th and hopes that the Fed will downshift their tightening pace at that meeting have faded, as inflation has been stickier than the Fed expected. The markets will be listening closely to Fed Chair Powell’s comments today, hopeful for some insights into what the Fed has planned in the next few months.

.

NZD/USD Technical

  • There is resistance at 0.5906 and 0.5999
  • There is support at 0.5782 and 0.5689

 

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

Latest posts by Kenny Fisher (see all)