New Zealand’s Strong Job Data Keeps Pressure on the Australian Dollar to New Zealand Dollar Exchange Rate
While investors are anticipating news from the Reserve Bank of New Zealand (RBNZ) before making further big moves on the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate, the pair has remained low thanks to recent data.
New Zealand data published in recent sessions has indicated that New Zealand’s economy is performing better than expected and this has boosted demand for the New Zealand Dollar.
In particular, New Zealand’s Q4 job market report published during Wednesday’s Asian session was surprisingly optimistic – as the key unemployment rate unexpectedly improved from 4.6% to 4.5%.
This was despite the participation rate coming in at 71% rather than slipping to the forecast 70.8%.
The quarterly employment change figure was better than forecast too, slipping from 2.2% to 0.5% rather than the predicted 0.2%.
Q4’s strong job data boosted Reserve Bank of New Zealand interest rate hike bets and now investors are even more strongly anticipating a potential shift in tone from the bank this week.
Australian Dollar (AUD) Fails to Find Support in Data
The Australian Dollar has not seen much support from foreign currency markets in recent sessions due to weak Australian data and an uncertain neutral tone from the Reserve Bank of Australia (RBA).
Tuesday saw the publication of Australia’s December retail sales and trade balance results, which both came in short of market expectations.
Retail sales slowed from 1.2% to -0.5%, missing the forecast -0.2%. Meanwhile the trade balance unexpectedly fell into a deficit of A$-1.358b due to a jump in imports.
The RBA avoided showing any change in tone during its February policy decision and continued to warn on subdued inflation and wage growth, leaving investors uncertain about whether the bank is likely to take a more hawkish tone in the coming year or not.
‘Aussie’ movement calmed on Wednesday, as Australia’s January construction PMI rose from 52.8 to 54.3.
New Zealand Dollar (NZD) Exchange Rates Strong Ahead of RBNZ Decision
Demand for the New Zealand Dollar has also been supported by risk-sentiment, as the latest Global Dairy Trade (GDT) auction ended with prices of New Zealand’s most lucrative commodity enjoying a strong rise.
Dairy prices jumped by 5.9% in February’s first auction, the best rise in dairy prices in over half a year. This has added to this week’s strong New Zealand Dollar trade.
Of course, high market anticipation for Thursday’s Reserve Bank of New Zealand (RBNZ) policy decision is keeping the New Zealand Dollar buoyed too.
Australian Dollar to New Zealand Dollar (AUD/NZD) Forecast: Reserve Bank of New Zealand Decision in Focus
Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate movement is likely to be influenced by the Reserve Bank of New Zealand (RBNZ) on Thursday. In fact, the RBNZ decision could cause the biggest AUD/NZD movement of the week.
If the RBNZ indicates that New Zealand’s job market is outperforming expectations or hints that the economy is general is stronger than previously thought, this could boost NZ interest rate hike bets.
If markets become more confident about the possibility of an RBNZ interest rate hike, the New Zealand Dollar could strengthen further and AUD/NZD would could see more losses.
On the other hand, if the RBNZ maintains a neutral tone or is more dovish than expected, AUD/NZD could recover some of its recent losses.
The Australian Dollar, on the other hand, could be influenced by Friday’s Australian ecostats – including December home loans data and a monetary policy statement from the Reserve Bank of Australia (RBA).