NZD stabilizes ahead of jobs report, Fed

It has been a nasty slide for the New Zealand dollar, which has posted eight successive losing sessions. NZD/USD is in positive territory today, but the currency remains vulnerable.

New Zealand employment report next

New Zealand releases the employment report for Q1 on Thursday. The labour market has been tight, with unemployment in Q4 falling to 3.2%. The RBNZ has projected that unemployment will remain unchanged in Q1, but there are forecast that it could drop as low as 3.0%, which would mark a new record low. That would certainly be positive news, but New Zealanders are more concerned about the soaring cost of living, as disposable incomes have fallen due to high inflation and rising mortgage rates.

The RBNZ will be keeping an watchful eye on the employment report, as strong numbers could indicate that wage growth is on the way up. This would be bullish for the New Zealand dollar, since it would put further pressure on the RBNZ to raise rates by 0.50% for a second straight month at the May 25^th meeting.

Fed expected to hike by 0.50%

The Federal Reserve concludes its policy meeting on Wednesday and is expected to raise rates by a half-point, which would be the largest rate hike in 20 years. There have been even been some forecasts  of a massive 0.75% rate, although that is an unlikely scenario. Still, the mere fact that such massive increases are being suggested indicates just how badly the Fed miscalculated inflation and has fallen behind on the inflation curve.

We could see additional 0.50% hikes in upcoming meetings, as the Fed comes out with guns blazing in order to contain spiralling inflation. This aggressive stance has boosted the US dollar against the major currencies, as Treasury yields continue to climb higher, with the 10-year yield hitting 3% on Monday for the first time since 2018. There are, however, growing concerns that a sharp rise in rates will choke growth and result in a recession.

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NZD/USD Technical

• 0.6391 is providing support, followed by 0.6325
• There is resistance at 0.6519 and 0.6585

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