NZD/USD steady ahead of employment release

The New Zealand dollar has edged lower on Tuesday. In the North American session, NZD/USD is trading at 0.6462, down 0.10%.

Markets await New Zealand job data

New Zealand releases the Q4 employment report later today. Unemployment is expected to tick lower to 3.2%, following a 3.3% reading in the third quarter. This would mark the lowest unemployment rate in over four decades. Employment change is projected to have climbed 0.7% in Q4, after a 1.3% gain in Q3. What will be particularly interesting is wage growth, which has been robust and may have jumped as much as 9% y/y in the private sector. Wage growth has been contributing to high inflation, which the Reserve Bank of New Zealand is determined to bring down. Inflation was unchanged at 7.2% in the fourth quarter, more than three times the central bank’s target of 2%.

The Federal Reserve concludes its 2-day meeting on Wednesday, and a 25-bp increase is priced at close to 100%. This doesn’t preclude volatility in the currency markets, as a hawkish stance from the Fed, either in the rate statement or in comments from Jerome Powell, could provide a boost to the US dollar. The markets continue to talk about a rate cut late in the year due to the weakening US economy, but the markets could be in for a nasty surprise if the Fed reiterates its hawkish stance that rates will remain high until inflation is subdued. What the Fed has in mind after tomorrow’s rate hike is not clear and investors will be hoping that the meeting will provide some clarity on that front.

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NZD/USD Technical

• 0.6446 is a weak support line. The next support level is 0.6365
• There is resistance at 0.6485 and 0.6532

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