Wednesday 6th November 2019
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The New Zealand dollar dipped after unemployment was slightly higher than expected in the third quarter.
The kiwi was trading at 63.72 US cents at 5pm versus 63.82 cents at 8am in Wellington. The trade-weighted index was at 70.17 points from 70.29.
“It rallied into it and then dipped on the release,” said Kiwibank senior FX trader Mike Shirley. “We have just sort of drifted around since then,” he said.
The domestic focus will now shift to the central bank’s monetary policy review next week and economists are still split on whether it will cut another 25 basis points to 0.75 percent or not after the jobs data.
Westpac Bank senior economist Michael Gordon said the data “suggest a stronger labour market than the Reserve Bank was anticipating.” Westpac surprised markets recently when it said it no longer expected a rate cut this month. It does, however, still expect a rate cut early next year.
The seasonally adjusted unemployment rate rose to 4.2 percent in the three months ended Sep. 30, from 3.9 percent in the June quarter, Stats NZ said. Economists surveyed by Bloomberg had forecast a rate of 4.1 percent.
Gordon said the RBNZ was forecasting a lift to 4.4 percent in the September quarter, although that didn’t account for the 3.9 percent in the June quarter. “So despite the rise in unemployment in today’s survey, it’s still lower than the RBNZ was expecting at this point,” he said. He also noted the RBNZ was forecasting private sector wage growth of 2.0 percent on the year, compared to the outcome of 2.3 percent.
"These results support our view that the RBNZ will leave the OCR unchanged at next Wednesday’s review,” Gordon said.
ASB Bank, meanwhile, said today's data showed "a few cracks are starting to appear in NZ’s previously rock-solid labour market.” The unemployment rate had also begun "a slow creep higher over the next 12 months.”
ASB still expects a 25 basis point cut at next week’s review followed by another in February.
While the RBNZ’s rate decision will be a key focus, Shirley said investors will also remain closely focused on any global headlines about Brexit or the progress of US-China trade talks.
The kiwi was trading at 92.39 Australian cents from 92.57, at 49.46 British pence from 49.52, at 57.52 euro cents from 57.66, at 69.48 yen from 69.68 and at 4.4597 Chinese yuan from 4.4726.
The two-year swap rate was at a bid price of 1.0385 percent from 1.0539 percent yesterday while 10-year swaps were at 1.5025 percent from 1.49 percent.
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