NZ Dollar Outlook: Kiwi may decline as greenback rises ahead of jobs report

Monday 3rd November 2014

The New Zealand dollar may decline as the US dollar continues to trend higher leading into a key jobs report, amid a slew of economic indicators and central bank meetings.

The kiwi will probably trade between 76 US cents and 79.80 cents this week, according to a BusinessDesk survey of 11 traders, strategists and brokers. Seven predict the kiwi will fall this week, while three expect it to rise and one says it will likely remain at current levels. The local currency recently traded at 77.72 US cents.

The New Zealand dollar has declined 12 percent since its peak in July as a revival in the US economy increases demand for the greenback. The Federal Reserve last week announced the end to its money-printing quantitative easing programme and traders are looking ahead to US labour data on Friday for signs of continued improvement in the world's largest economy.

"We are seeing an acceleration of the US dollar strength this week," said Tim Kelleher, ASB Bank head of institutional foreign exchange sales in New Zealand. "If we get another strong employment print out of the States then I think you can see that US dollar move accelerate further."

Friday’s data is expected to show American employers added about 235,000 jobs in October, while the jobless rate held at a six-year low of 5.9 percent, according to a Bloomberg survey.

Ahead of that report, the US has the ADP employment report on Wednesday and weekly jobless claims on Thursday.

Other US economic data scheduled for release in the coming days include the PMI and ISM manufacturing indices, motor vehicle sales, and construction spending, due today; international trade and factory orders, due Tuesday; PMI services index and ISM non-manufacturing index, due Wednesday; productivity and costs, due Thursday; and consumer credit, due Friday.

In New Zealand this week, traders will be eyeing tomorrow's ANZ Commodity Price Index for October and Fonterra Cooperative Group's GlobalDairyTrade auction early Wednesday morning.

Later Wednesday morning, data will be released on New Zealand third-quarter employment, including the unemployment rate and wage inflation. The Reserve Bank last week kept the benchmark interest rate on hold and removed a reference to the need for further tightening to curb inflation, following weaker-than-expected inflation data.

"The Reserve Bank has attributed part of the current low inflation performance to subdued wage inflation," Robin Clements, an economist at UBS New Zealand, said in a note. "As a result, the coming quarterly round of labour market data takes on heightened importance."

New Zealand private sector wages probably rose 0.5 percent in the third quarter, compared with the second quarter, to be 1.9 percent ahead of the same quarter a year earlier, according to a Reuters poll of economists.

Meantime, state-owned valuer Quotable Value publishes its latest monthly house data on Thursday.

Australia also has a slew of data scheduled for release, including building approvals and commodity prices today, retail sales and trade data tomorrow, services PSI on Wednesday, employment data and visitor arrival figures on Thursday and construction PCI on Friday.

The Reserve Bank of Australia is expected to keep interest rates on hold tomorrow while its Statement of Monetary Policy on Friday is likely to show little change to the bank's forecasts, UBS's Clements said.

A key focus this week will be European Central Bank president Mario Draghi's press conference following the ECB meeting on Thursday as traders mull the outlook for further monetary stimulus to bolster weak inflation and boost growth. The Bank of England also meets Thursday.

In terms of economic data, the coming days will bring data on euro-zone manufacturing PMI, due today; euro-zone producer prices, due Tuesday; euro-zone services PMI and euro-zone retail sales, due Wednesday; German factory orders, due Thursday; and German industrial production as well as trade balance, due Friday.

BusinessDesk.co.nz

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