NZD up on Inflation Expect., soft US NFP

NZD/USD has posted gains for a third straight day. In the North American session, The pair is currently trading at 0.7270, up 0.58% on the day. The New Zealand dollar has looked sharp this week, registering gains of 1.61%.

Relations between New Zealand and China have been souring lately. New Zealand Prime Minister Jacinda Ardern had some stern comments about China this week, saying that the differences between the two countries had become more difficult. The Arden government recently criticised China for its treatment of the Uyghurs minority, but stopped short of accusing China of genocide, a move which would have likely caused a severe response from Beijing.

China is New Zealand’s largest trading partner, so Arden can ill-afford to take any steps which could jeopardize the trading relationship between the two countries. China is also having a war of words with Australia, and the suspension of an economic dialogue by the Chinese sent both the Australian and New Zealand dollars lower on Thursday. Any further escalation in tensions between China on the one hand and Australia and New Zealand on the other would cause jitters in the financial markets and likely weigh on the New Zealand dollar.

In economic news, New Zealand Inflation Expectations rose to 2.05% in the first quarter, up from 1.89% in Q4 of 2020. This marked the first time that the indicator has risen above the 2% level since Q1 of 2019. The reading is significant, as inflation expectations in the private sector can manifest into actual inflation. The RBNZ will undoubtedly be closely monitoring this latest release, as policymakers may have to consider a taper of QE if inflation does move higher in the coming months.

US Nonfarm Payrolls fizzle

The market was all set for a blowout party from US nonfarm payrolls, but in the end there was little to celebrate, as the economy created just 266 thousand jobs, nowhere near the estimate of 990 thousand. There were expectations that NFP would break above the one-million mark, and some analysts even projected a reading above the two-million mark. The unemployment rate rose to 8.1%, up from 7.8%.

The news was not all bad, as wage growth rebounded with a strong gain of 0.7%, after a read of -0.1% beforehand. The US economy remains in good shape, and investors are unlikely to let a weak NFP report ruin the optimism over the economy.

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NZD/USD Technical

• NZD/USD is testing resistance at 0.7249. Above, there is resistance at 0.7336
• There is support at 0.7113 and 0.7064

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