NZD buoyed by softening US labour market
Daily Currency Update
The New Zealand dollar tracked upward through trade on Thursday on the heels of a broadly weaker USD. Markets largely ignored weaker than anticipated Q1 business indicators data and expectations for a contraction in GDP growth. The promise of recession was not enough to sink the kiwi, instead the NZD benefited from an environment wherein bad news for the US economy is good news for equities and risk assets. US jobless claims hit their highest level in almost two years and with leading indicators pointing to a rapid increase in calls for unemployment benefits, a broad weakening of labour market conditions is elevating calls for the Fed to end this current tightening cycle. The NZD pushed toward US$0.6050 late in the domestic session before climbing steadily overnight to find resistance at US$0.61.Our attentions turn now to China inflation data. With the yuan under increasing pressure a miss could spill over into the NZD, stifling momentum into the weekly close.
Key Movers
The US dollar underperformed through trade on Thursday with dollar indices giving up near 0.7% on the day. US jobless claims jumped last week to their highest level since October 2021 and point to a broader softening in the labour market. The uptick in claims for unemployment benefits comes on the heels of last week’s non-Farm payroll print, wherein the unemployment rate jumped a hefty three tenths of a percent and wage inflation slowed. With leading indicators pointing to a rapid rise in unemployment claims and sharp correction in wage growth, there is growing support for the Fed to end its current tightening cycle. A pause in the cycle next week is likely now, yet the market still has priced a further 20-point tightening between June and July, suggesting a rate hike in July is to be expected. With the USD under pressure the euro extended back through 1.07 and 1.0750 marking intraday highs just short of 1.0790, while sterling punched back above 1.25 to touch 1.2560, and the hapless yen forced a break back below 140 and 139 against a broader downturn in the global rates backdrop.Our attentions turn now to China inflation data and a Canadian employment report as markers for direction into the weekly close and next weeks all important fed update.
Expected Ranges
- NZD/USD: 0.6020 - 0.6120 ▲
- NZD/EUR: 0.5620 - 0.5720 ▲
- GBP/NZD: 2.0480 - 2.0720 ▼
- NZD/AUD: 0.9020 - 0.9120 ▲
- NZD/CAD: 0.8050 - 0.8180 ▲