NZ Dollar shrugs after soft jobs report

The New Zealand dollar has steadied on Thursday, after a sharp decline of 1.5% a day earlier. NZD/USD is trading higher 0.08% on the day at 0.5890, at the time of writing.

New Zealand’s employment declines

New Zealand’s labor market is showing signs of cracks. Employment in the fourth quarter declined by 0.2% q/q, down from the 0.4% gain in Q4 2023 and shy of the market estimate of 0.3%. This marked the second decline in three months. The unemployment rate jumped to 4.3%, up from 4% in the fourth quarter and above the market estimate of 4.3%. Despite the weakness in the labor market, private sector wage growth remained high at 3.8% y/y.

How will the Reserve Bank of New Zealand react to the jobs report? The RBNZ has maintained the cash rate at 5.50% for six straight times, continuing its stance of “higher for longer”. The inflation rate fell in the first quarter from 4.7% to 4% but this remains above the upper band of the 1% to 3% target range. RBNZ policy makers will be keeping a close eye on key data, in particular inflation for second quarter, which will be released in July. Three of the four major banks expect a rate cut in the fourth quarter, while a fourth is projecting a cut in Q1 2025.

The New Zealand ANZ business confidence index fell to 14.9 in April, down from 22.9 a month earlier. Business confidence fell across all sectors and business activity compared to a year ago has decreased, with the retail and manufacturing sectors hit particularly hard.

NZD/USD technical