The New Zealand dollar has soared today. In the European session, NZD/USD is trading at 0.6018, up an impressive 1.1% at the time of writing.
New Zealand job growth surprises on the upside
New Zealand’s labour market has been cooling off due to elevated interest rates and the markets were braced for a soft jobs report for the second quarter. Instead, job growth rebounded and unemployment was lower than expected, sending the New Zealand dollar sharply higher.
Job growth expanded by 0.4% in the second quarter, up from -0.2% in Q1 and above the market estimate of -0.2%. The unemployment rate rose from 4.4% to 4.6%, a notch under the market estimate of 4.7%. This is the highest level since Q1 of 2021 but investors were pleased that it was lower than expected.
The positive employment report has reduced market expectations of a rate cut from the Reserve Bank of New Zealand, which has driven the New Zealand dollar sharply higher today. Inflation has fallen to 3.3%, its lowest level in three years and close to the upper level of the central bank’s target range between 1% and 3%. A weak employment report could have cemented a rate cut at next week’s meeting but the job data was better than expected, which will complicate the rate decision.
The final tier-1 release before the August 14 meeting is Inflation Expectations on Thursday. This indicator is closely followed by the central bank and will be a factor in the rate decision. Inflation Expectations has been on a steady downtrend and is expected to ease to 2.33% in the second quarter, compared to 2.5% in the first quarter.
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NZD/USD Technical
- NZD/USD is testing resistance at 0.6009. Above, there is resistance at 0.6061
- There is support at 0.5934 and 0.5882
