NZ dollar higher as nonfarm payrolls looms

The New Zealand dollar has extended its gains on Friday. NZD/USD is trading at 0.5985, up 0.39% at the time of writing.

It has been a roller-coaster ride for the New Zealand dollar, which plunged 1.5% on Tuesday but has since rebounded and fully recovered.

US nonfarm payrolls expected to ease

The US economy remains strong and a big factor has been the robust labor market, which has weathered the Federal Reserve’s steep rate-tightening cycle. The March nonfarm payrolls report sizzled at 303,000, well above expectations and indicative of a tight labour market. The April report is expected to fall to 243,000 but that would still be a strong reading. Wage growth will be carefully monitored as it contributes to inflation, which has moved higher and frustrated the Fed’s plans to lower rates. Wages rose 0.3% m/m in April and are expected to remain unchanged in the April release.

The US will also release the ISM Services PMI, which is raising concerns as expansion has weakened over the past two months and fell to 51.7 in March. The downward trend is expected to continue, as the market estimate stands at 50.9, which would indicate stagnation.

The Reserve Bank of New Zealand has kept the cash rate unchanged at 5% since July and hasn’t signaled plans to shift its policy and lower rates. The central bank meets next on May 22^nd and is expected to hold rates.

The RBNZ’s financial report, released this week, said that the country’s financial system remains strong despite elevated interest rates. The report noted that global inflation was dropping but the risk of persistent inflation could keep global rates in restrictive territory.

NZD/USD Technical

• NZD/USD is testing resistance at 0.5979. Above, there is resistance at 0.6018
• 0.5932 and 0.5893 are providing support

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