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NZ employment report preview and what next for the NZDUSD

May 2, 2022 1:45 PM

 

A huge week ahead as three central banks line up to raise interest rates, and three employment reports drop, including one in New Zealand on Wednesday morning.

The March quarter labour market figures are expected to confirm the labour market remains extremely tight. The market is looking for the unemployment rate to drop from 3.2% to a new record low of 3.1%.

Labour market indicators have remained strong. Jobseeker benefits have continued to edge lower, and job advertisements have picked up. Workers remain hard to get, which should flow through into higher wages and higher salaries, which will flow through into higher inflation.

Preventing the unemployment rate from falling further, the participation rate sits near record highs at 71.1% of the working-age population.

The private sector Labour Cost Index (LCI), another name for wage inflation, is expected to rise by 0.7% in the quarter to see annual wage inflation lift to 3.1%. Wage inflation is expected to rise to over 4% by the end of the year.

The numbers outlined above would represent a modest upside surprise to RBNZ’s February Monetary Policy Statement forecasts. The expectation of robust jobs data may have been a factor behind the RBNZ’s decision to lift the OCR by 50bp to 1.50% at its last meeting in Mid-April.

There are 10bp of rate hikes priced for the RBNZ’s May 26th meeting, 50bp priced for its July 14th meeting, and 212 bp of hikes priced before year-end, before an OCR end rate around 4.15% by late 2023.

Despite this, the NZDUSD has remained friendless in April, falling almost 7% in the face of an uber hawkish Federal Reserve. Momentum indicators are now screaming oversold, and with the NZDUSD testing critical support at .6400c, the chances of a bounce-back towards .6700c are building.

 

A huge week ahead as three central banks line up to raise interest rates, and three employment reports drop, including one in New Zealand on Wednesday morning.

The March quarter labour market figures are expected to confirm the labour market remains extremely tight. The market is looking for the unemployment rate to drop from 3.2% to a new record low of 3.1%.

Labour market indicators have remained strong. Jobseeker benefits have continued to edge lower, and job advertisements have picked up. Workers remain hard to get, which should flow through into higher wages and higher salaries, which will flow through into higher inflation.

Preventing the unemployment rate from falling further, the participation rate sits near record highs at 71.1% of the working-age population.

The private sector Labour Cost Index (LCI), another name for wage inflation, is expected to rise by 0.7% in the quarter to see annual wage inflation lift to 3.1%. Wage inflation is expected to rise to over 4% by the end of the year.

The numbers outlined above would represent a modest upside surprise to RBNZ’s February Monetary Policy Statement forecasts. The expectation of robust jobs data may have been a factor behind the RBNZ’s decision to lift the OCR by 50bp to 1.50% at its last meeting in Mid-April.

There are 10bp of rate hikes priced for the RBNZ’s May 26th meeting, 50bp priced for its July 14th meeting, and 212 bp of hikes priced before year-end, before an OCR end rate around 4.15% by late 2023.

Despite this, the NZDUSD has remained friendless in April, falling almost 7% in the face of an uber hawkish Federal Reserve. Momentum indicators are now screaming oversold, and with the NZDUSD testing critical support at .6400c, the chances of a bounce-back towards .6700c are building.

Source Tradingview. The figures stated are as of May 2nd, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

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