NZD/USD shrugs after NZ employment report

• New Zealand’s unemployment rises, wages ease

The New Zealand dollar is drifting on Wednesday, after jumping 0.73% a day earlier. In the North American session, NZD/USD is trading at 0.6104, up 0.12%.

New Zealand’s employment change rises

New Zealand’s employment report for the fourth quarter indicated that the labour market remains relatively strong. Employment rebounded with a gain of 0.4% q/q, after a 0.2% decline in the third quarter. This edged above the market estimate of 0.3%. Wage growth eased to 3.9% y/y, down from 4.1% in Q3 and higher than the market estimate of 3.9%. Finally, the unemployment rate crept higher to 4.0%, up from 3.9% but below the market estimate of 4.0%.

It will be interesting to see how the Reserve Bank of New Zealand responds to this latest job data. The name of the game for the central bank is to bring inflation back to the target range of 1 percent to 3 percent. Wage inflation is easing and the labour market is cooling but with inflation at 4.7%, the RBNZ will not be in any rush to start lowering interest rates.

At the last meeting in November, the RBNZ warned that rates could move higher and said it wasn’t planning to lower rates until 2025. However, data revisions have shown that the economy is weaker than previously thought, which has raised expectations of rate cuts in the second half of this year. The RBNZ has kept the cash rate unchanged at 5.5% for five straight times, which likely means that its steep rate-tightening cycle has run its course, despite the Bank’s warnings that rates could rise. Inflation has fallen dramatically since the RBNZ began its rate-tightening cycle in 2021 but it remains sticky and well above the target range. The RBNZ will likely maintain rates until inflation declines further.

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NZD/USD Technical

• There is resistance at 0.6116 and 0.6135
• 0.6081 and 0.6062 are providing support

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